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Student Loans (Blog or Resources)

Should I Pay Student Loans with a Credit Card?

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Paying off student loans can be a challenging process, so it’s natural to look for creative ways to accomplish your goal. One question some student loan borrowers have asked is whether they can use a credit card to pay student loans. 

 

Technically, it is possible, but it’s generally not a good idea. Here’s what you should know before you try it.

 

Can You Use a Credit Card to Pay Student Loans?

Unfortunately, making monthly student loan payments with your credit card isn’t an option. The U.S. Department of the Treasury does not allow federal student loan servicers to accept credit cards as a payment method for monthly loan payments.

 

While that restriction doesn’t extend to private student loan companies, you’ll be hard-pressed to find one that will offer it.

 

That said, paying off student loans with a credit card is technically possible through a balance transfer. Many credit cards offer this feature primarily as a way to transfer one credit card balance to another, and if you’re submitting a request directly to your card issuer, that’s typically the only option.

 

However, some card issuers will send customers blank balance transfer checks, which gives you some more flexibility. For example, you can simply write a check to your student loan servicer or lender and send it as payment. Alternatively, you can write a check to yourself, deposit it into your checking account, and make a payment from there.

 

Balance transfer checks often come with introductory 0% APR promotions, which give you some time to pay off the debt interest-free. That said, here are some reasons why you should generally avoid this option:

 

  • Once the promotional period ends, your interest rate will jump to your card’s regular APR. The full APR will likely be higher than what your student loans charge.
  • Balance transfers come with a fee, typically up to 5% of the transfer amount, which eats into your savings.
  • Credit cards don’t have a set repayment schedule, so it’s easy to get complacent. You may end up paying back that balance at a higher interest rate for years to come.
  • Credit cards have low minimum payments to encourage customers to carry a balance, which could cause more problems. 
  • You won’t earn credit card rewards on a balance transfer, so you can’t count on that feature to help mitigate the costs.

 

So if you’re wondering how to pay student loans with a credit card, it is possible. But you’re better off considering other options to pay down your debt faster.

 

Can You Use a Student Loan to Pay Credit Cards?

If you’re still in school, you may be wondering if it’s possible to use your student loans to pay your credit card bill. Again, technically, yes, it is possible. But there are some things to keep in mind. 

 

The Office of Federal Student Aid lists acceptable uses for federal student loans, and private student lenders typically follow the same guidelines. Your loans must be used for the following:

 

  • Tuition and fees
  • Room and board
  • Textbooks
  • Supplies and equipment necessary for study
  • Transportation to and from school
  • Child care expenses

 

If you incur any of these expenses with your credit card, you can use student loan money to pay your bill. However, if you’re also using your credit card for expenses that aren’t eligible for student loan use, it’s important to separate those so you aren’t using your loans inappropriately.

 

Also, the Office of Federal Student Aid doesn’t list credit card interest as an eligible expense. So if you’re not paying your bill on time every month and incurring interest, be careful to avoid using your student loan money for those expenses.

 

How to Pay Down Your Student Loans More Effectively

If you’re looking for a way to potentially save money while paying down your student loans, consider student loan refinancing

 

This process involves replacing one or more existing student loans with a new one through a private lender like ELFI. Depending on your credit score, income, and other factors, you may be able to qualify for a lower interest rate than what you’re paying on your loans right now. 

 

If that happens, you’d not only save money on interest charges, but you could also get a lower monthly payment. 

 

Refinancing also gives you some flexibility with your monthly payments and repayment goal. For example, if you can afford to pay more and want to eliminate your debt faster, you can opt for a shorter repayment schedule than the standard 10-year repayment plan. 

 

Alternatively, if you’re struggling to keep up with your payments or want to reduce your debt-to-income ratio, you could extend your repayment term to up to 20 or even 25 years, depending on the lender. 

 

Keep in mind, though, that different refinance lenders have varying eligibility requirements. Also, just because you qualify, it doesn’t necessarily mean you can get more favorable terms than what you have now.

 

However, if you’re having a hard time getting approved for qualifying for better terms, most lenders will allow you to apply with a creditworthy cosigner to improve your odds of getting what you’re looking for.

 

Before you start the process, however, note that if you have federal loans, refinancing will cause you to lose access to certain programs, including student loan forgiveness and income-driven repayment plans. But if you don’t anticipate needing either of those benefits, it won’t be an issue.

 

The Bottom Line

If you’re looking for ways to pay off your student loans more effectively, you may have wondered whether you can use your credit cards. While it’s possible, it’s generally not a good idea. Also, if you’re still in school, it’s important to be mindful of how you’re allowed to use your student loan funds, especially when it comes to making credit card payments.

 

A better approach to paying down your student loan debt is through refinancing. Take some time to consider whether refinancing your student loans is right for you, and consider getting prequalified to see whether you can get better terms than what you have on your current loans.

Should You Save, Invest or Pay Off Student Loans?

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One of the questions many students grapple with as they begin life post-college is whether to invest or aggressively pay off their student loans. Figuring out when to start investing can be a complicated issue, especially if you’re worried about how much student loan debt you ended up with after college.

 

The good news is that it’s possible to start investing while paying student loans. However, everyone needs to make a decision based on their own situation and preferences. As you consider your own choices, here’s what to consider when deciding whether to start investing with student loans.

 

Should I Invest When I Have Student Loan Debt?

When you have student loan debt, it’s tempting to focus on paying that down—just so it isn’t hanging over your head. However, there are some good reasons to invest, even if you’re paying off student loans. 

 

The benefits of investing include:

 

Compounding Returns

The earlier you invest, the longer your portfolio has time to grow. When you invest, you receive compounding returns over time. Even small amounts invested consistently can add up down the road. If you decide to wait until your student loans are paid off before you invest, you could miss out on several years of potential returns.

 

Tax-Deductible Interest

If you meet the requirements, a portion of your student loan interest might be tax-deductible. If you can get a tax deduction for a portion of your interest to reduce its cost to you, that could be a long-term benefit. It’s not the same as not paying interest at all, but you reduce the negative impact of the interest. For more information about this option, speak with your financial advisor.

 

Returns on Investment May Exceed What You Pay in Interest

The long-term average return of the S&P 500 is 9.24%. If you qualify for a tax deduction on your student loan interest, you can figure out your effective interest rate using the following formula:

 

Student loan interest rate x [1 – your marginal tax rate]

 

If you fall into the 22% marginal tax bracket and your average student loan interest rate is 6%, you could figure out your rate as follows:

 

6 x [1 – 0.22] = 4.68%

 

Long-term, the potential return you receive on your investments are likely to offset the interest you pay on your student loans.

 

Don’t forget, too, that if you decide to refinance your student loans, you might be able to get an even lower rate, making the math work out even more in your favor if you decide to invest.

 

Student Loan Forgiveness

Another reason for investing with student loans is if you plan to apply for forgiveness. If you know that you’re going to have your loans forgiven, rushing to pay them off might not make sense. Whether you’re getting partial student loan forgiveness through a state program for teachers or healthcare workers, or whether you plan to apply for Public Service Loan Forgiveness, you might be better off getting a jump on investing, rather than aggressively tackling your student debt.

 

A Word of Caution About Investing

While investing can be a great way to build wealth over time, it does come with risk. When paying off student loan debt, you have a guaranteed return—you get rid of that interest. With investing, you aren’t guaranteed that return. However, over time, the stock market has yet to lose. As a result, even though there are some down years, the overall market trends upward. 

 

If you don’t have the risk tolerance for investing while you have student loans, or if you want the peace of mind that comes with paying off your debt, you might decide to tackle the student loans first and then invest later.

 

How to Start Investing

If you decide to start investing while paying student loans, there are some tips to keep in mind as you move forward.

 

Make at Least Your Minimum Payment

No matter your situation, you need to at least make your minimum payment. You don’t want your student loans to go into default. Depending on your income and situation, you might be able to use income-driven repayment to have a lower payment and then free up more money to invest. Carefully weigh the options to make sure that makes sense for your situation since income-driven repayment can result in paying interest on student loans for a longer period of time.

 

Decide How Much You Can Invest

Next, figure out how much you can invest. Maybe you would like to pay down your student loan debt while investing. One way to do that is to determine how much extra money you have (on top of your minimum student loan payment) each month to put toward goals like investing and paying down debt. Maybe you decide to put 70% of that toward investing and the other 30% toward paying down your student loans a little faster. There are different ways to divide it up if you still want to make progress on your student loans while investing.

 

Consider Retirement Accounts

If your job offers a retirement account, that can be a good place to start investing. Your investment comes with tax benefits, so it grows more efficiently over time. Plus, you can have your contributions made automatically from your paycheck, so you don’t have to think about investing each month.

 

Use Indexing to Start

Many beginning investors worry about how to choose the “right” stocks. One way to get around this is to focus on using index funds and index exchange-traded funds (ETFs). With an index fund or ETF, you can get exposure to a wide swath of the stock market without worrying about picking stocks. This can be one way to get started and take advantage of market growth over time. As you become more comfortable with investing, you can use other strategies to manage your portfolio.

 

Bottom Line

It’s possible to start investing while paying student loans. In fact, by starting early, you might be able to grow your portfolio for the future even while you work on reducing your student loan debt. Carefully consider your situation and research your options, and then proceed in a way that makes sense for you.

How Marriage Can Impact Your Student Loan Repayment Plan

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For better and for worse, marriage can really change your financial situation. The tax bracket you fall into, the investment rules you need to follow, even your financial priorities can, and likely will, change after you tie the knot.

 

That principle also holds true when it comes to student loans. Getting married can help, hurt or simply alter your student loan repayment trajectory.

 

Read below for a breakdown of the most important things to consider when it comes to marriage and student loans.

 

Marriage Will Affect Income-Driven Repayments

Borrowers with federal loans on an income-driven repayment plan may end up paying more every month when they get married.

 

These plans include:

  • Revised Pay As You Earn Repayment Plan (REPAYE)
  • Income-Based Repayment Plan (IBR)
  • Income-Contingent Repayment Plan (ICR)
  • Income-Sensitive Repayment Plan

 

The federal government will include your spouse’s income when calculating your monthly payment. You may see a huge increase in the amount due if your spouse earns significantly more than you.

 

Let’s say you earn $50,000 a year and owe $80,000 in student loans with a 5.3% interest rate. If you choose an income-driven plan, your monthly payment will range between $257 and $621, depending on the specific plan you choose.

 

If you marry someone whose Adjusted Gross Income (AGI) is $100,000, your monthly payment under an income-driven plan would increase to between $1,024 to $1,035 a month. You could end up paying tens of thousands more over the life of the loan.

 

Only the REPAYE plan won’t factor in your spouse’s income, assuming you file taxes separately. However, filing taxes separately can hurt your overall bottom line because you may miss out on significant tax deductions and credits. Talk to an accountant to see which filing status is best for your financial situation.

 

If you earn much more than your spouse, you may see your payments decrease or only slightly increase when you get married. You can use the official federal loan simulator to see how your payments will change.

 

May Lose Student Loan Interest Deduction

Borrowers may be able to deduct up to $2,500 in student loan interest on their taxes, whether they itemize or take the standard deduction. But only those who earn below a certain amount are eligible for this deduction. For more information about this option, speak with your financial advisor.

 

In 2020, single borrowers whose Modified Adjusted Gross Income (MAGI) was $70,000 or less may be able to deduct the full $2,500. Those with a MAGI between $70,000 and $85,000 may be able to take a partial deduction. Individuals who earn more than $85,000 do not qualify for the deduction.

 

Married couples may be eligible for the deduction if their MAGI is less than $140,000. The deduction is reduced for couples whose MAGI is between $140,000 and $170,000, and is eliminated for those whose MAGI is more than $170,000.[1]

 

If you currently qualify for this deduction, you may lose that eligibility if you marry someone who pushes your income past the threshold. Also, you cannot claim this deduction at all if you file taxes separately. This is another instance where filing taxes separately may not be worth it.

 

Legal Responsibility

Federal student loans remain the borrower’s responsibility, even if they die or default on the loan. The government won’t request payment from a spouse for their husband or wife’s student loan balance.

 

Private loans are different based on state laws as far as protocols for handling the original borrower’s death. Contact a local attorney if you have questions or concerns. Borrowers who are worried about leaving their student loans behind can increase their life insurance payout to compensate.

 

Divorce Impacts Student Loans

In most states, you’re only responsible for the loans incurred in your name, unless you’re a cosigner. But if you or your spouse take out private student loans while married, the other person may still be liable for them even if you get divorced.

 

A prenuptial or postnuptial agreement can sometimes work around this. Make sure to have a qualified lawyer draft one of these agreements if this is a concern.

 

Make Payments Easier

Most couples find that their overall living expenses decrease when they get married because there’s someone to split the rent, utilities and groceries with. This can free up more money for student loans.

 

Married borrowers may also be less likely to miss payments or default on their loans if they lose their job, because their spouse can pick up the slack. Obviously, this only holds true if both spouses have sources of income.

 

Can Cause Disagreements

Statistically, money is one of the most common reasons for divorce. Conflict can easily arise if one person is bringing in $100,000 of student loan debt and the other person is debt-free. The debt-free spouse may feel burdened, while the indebted spouse may feel shame and judgment.

 

Before you get married, discuss how you want to handle the student loan situation. Should you keep finances separate until the borrower repays the balance, or should you combine your incomes and knock out the debt together?

 

Marital counseling can help both parties work through these issues before they become a major problem, and a financial planner can help couples formulate a strategy that works best for everyone.

 

Your Spouse Can Cosign

If you were denied a student loan refinance because of your income or credit score, you may be a better candidate with a cosigner. Most lenders consider a spouse an eligible cosigner if they have a good credit score and stable income. Refinancing your student loans to a lower interest rate can save you hundreds and thousands in interest.

 

Having your spouse co-sign on your refinance means they’ll be legally liable if you default. This will also impact their credit score and show up on their credit report, so make sure your partner understands what they’re agreeing to before cosigning on your refinance.

 

Refinancing your student loans involves a simple application process. Explore the ELFI website today to learn more about student loan refinancing.

The Differences Between Undergraduate and Graduate Student Loans

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If you are thinking about getting a graduate degree and you have undergraduate student loans, you probably have some familiarity with borrowing student loans for school. However, when you are deciding how to pay for graduate school, there are some key differences you should know that can help you save some money. 

 

Federal Graduate Student Loan Considerations

Interest Rates

Federal graduate student loans often have higher interest rates than federal undergraduate student loans. A higher interest rate results in more interest costs, meaning you are paying more money to borrow the loan. Interest rates can change annually, so it’s important to know the current rates when you’re considering taking out student loans.

 

The difference in interest rates can add up to thousands of dollars in interest over the life of the loan. When borrowing federal graduate student loans you want to be cognizant of only borrowing the amount you actually need since you will be paying a much higher interest rate on the loan.  

 

FAFSA

When applying for Federal Student Aid, you are required to fill out the FAFSA form, as you likely did for your undergraduate degree. The major difference is graduate students are considered independent students as opposed to dependent students, and therefore, your parent’s financial information is not needed. In addition, as an independent student, you may earn less than your parents, which could make additional financial aid available. 

 

Higher Borrowing Limits 

Federal graduate student loans have higher borrowing limits to cover the higher cost of tuition. For undergraduates, the maximum that can be borrowed depends on your year in school and whether you are a dependent or independent student, with limits ranging from $9,500 to $12,500 per year. Graduate students can borrow up to $20,500 per year in direct unsubsidized loans. There is no limit to how much can be borrowed in Grad PLUS loans, except for the cost of attendance. 

 

These higher limits can be helpful when you need to cover all the expenses related to graduate school. However, this can lead to borrowing large loans at high interest rates that may be difficult to repay. Since graduate loans can be used to pay living expenses it is important to continue living on a budget and only borrowing the amount necessary.  

 

No Subsidized Loans 

With subsidized loans, interest does not accrue while you are in school. Unfortunately, that option is not available for federal graduate student loans. Your graduate student loan options include Direct Unsubsidized loans and Direct PLUS loans, which both begin accruing interest as soon as they are disbursed.

 

To avoid accruing more interest than necessary, be sure to minimize your graduate school expenses and loans. Also, if you are able to pay at least the interest costs while you are in school this will prevent you from having a larger total to pay back after graduation.

 

If you find yourself in need of greater financial flexibility, then consider student loan refinancing with a private lender after graduation. This option could decrease your interest rate and monthly student loan payment.

 

Additional Graduate Student Loan Considerations

Financial Aid More Limited 

Undergraduates have several financial aid options based on need, such as the Federal Pell Grant, which in many cases does not have to be repaid.

 

Although grants and other forms of financial aid are sometimes available to graduate students, these options are more limited. Some financial aid options that may be available for graduate school include grants, scholarships, fellowships and federal and private student loans.

 

Loan Fees

You may pay higher origination fees for federal graduate student loans versus undergraduate student loans. The origination fees are a percentage of the total loan amount you borrow. This fee will be taken out of your loan disbursement which lowers the actual amount you will receive, but the full amount of the loan is required to be paid back. 

 

Some private lenders, like ELFI, do not charge an origination fee for loans, so be sure to consider that when comparing loan options. 

 

The Benefit of Private Graduate Student Loans

Private student loans may be more beneficial for graduate school than undergraduate student loans. That’s because you may be able to score a lower interest rate on a private student loan if you have an excellent credit history. Private student loan interest rates are based on your income and credit history, so if you are looking to return to school while you are still employed, they may be a good option for you.

 

Refinancing Your Graduate Student Loans

If you already have undergraduate and graduate student loans, student loan refinancing could help you to save money on your monthly payment and on interest costs. Refinancing is when you obtain a new loan to pay off previous student loans. You can refinance both federal and private undergraduate and graduate student loans.

 

The Bottom Line

Understanding the differences between undergraduate and graduate student loans can help you make an informed decision about the best way to fund your education. If you have significant student debt, student loan refinancing could help you to save money and pay down your loans more quickly.

Student Loan Refinancing vs. Income-Driven Repayment Plans   

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Student loans can be a real budget killer, with the average student loan payment being $393 per month. Over time, you may want to lower your monthly payment to make it more manageable or to put your savings toward other financial goals. Depending on the types of loans you have, you may choose to pursue income-driven repayment or student loan refinancing.

 

If you have federal student loans, you may be eligible to select an Income-Driven Repayment plan. Alternatively, for private and federal loans, student loan refinancing could be a better choice. To figure out whether you have federal student loans, check the Federal Student Aid site where all the information on federal loans will be available. To determine whether you have private student loans, request your credit report to see any reported private loans.

 

Once you know the types of loans you have, here are a few options that may reduce your student loan payment:

 

Student Loan Refinancing

When you refinance your student loans, you obtain a new loan with a different lender, often a bank, credit union or third party. You can refinance your private or federal student loans, or a combination of both. Your refinanced loan will have a new interest rate, term length and monthly payment. Here are a few important things to know about student loan refinancing:

 

Eligibility

To qualify for student loan refinancing, you must meet certain eligibility requirements.

 

Most lenders require:

  • A minimum credit score in the high 600s
  • Stable employment with proof of income
  • A minimum student loan amount
  • Debt-to-income ratio of less than 50%

 

Interest Rate

One benefit of refinancing your student loans is that you may earn a reduced interest rate, which can save you thousands of dollars. Here’s how it works:

 

If you have $65,000 in total student loan debt, a 15-year term and an interest rate of 6.8%, your monthly payment will be approximately $577. When you refinance, if you keep the 15-year term and qualify for an interest rate of 3.77%, your payment will be reduced by $104 per month. This results in $18,000 in interest savings over the life of the loan!

 

Loan Terms

In addition to potentially reducing your interest rate, another benefit of refinancing student loans is you have more control over the terms of your repayment. You can select a fixed or variable interest rate, choose the loan provider that best meets your needs, and choose the amount of years of the loan.

 

If you want to pay your loan off more quickly, you can select a shorter student loan repayment term, although this will most likely increase your monthly payment. If you want to reduce your monthly payment, you can lengthen your student loan repayment term, but this may result in paying more in interest over the life of the loan. Try ELFI’s Student Loan Refinance Calculator* to see how much you could save.

 

Income-Driven Repayment Plans

These plans are only available for federal student loans. There are four Income-Driven Repayment (IDR) plans offered, and with each plan, the payment is based on income and family size. Here are a few important things to know about Income-Driven Repayment:

 

Recertification

To select an IDR plan, you must apply through your loan servicer. Once an IDR plan is established, you’ll be required to recertify each year by submitting documents to prove your income and family size.

 

Types of Income-Driven Repayment Plans

Once you recertify the monthly payment can go up or down depending on your income. The IDR plans available are:

 

Revised Pay As You Earn (REPAYE)

The payment is always based on your income and family size. Your payment can increase to be higher than your payment on the standard repayment plan if your income increases significantly. The term length is 20 years for undergraduate loans and 25 for graduate loans.

 

Pay As You Earn (PAYE)

The payment is 10% of your discretionary income but your payment cannot increase to be more than the payment on the standard 10 year repayment plan. The term length is 20 years for all loans.

 

Income-Based Repayment (IBR)

The payment is 10% or 15% of your discretionary income, depending on when you borrowed the loans. Your payment will never be more than the 10-year standard repayment amount. The term length is 20 or 25 years depending on when you borrowed the loans.

 

Income-Contingent Repayment (ICR)

The payment can be up to 20% of your discretionary income and the loan term is 25 years.

 

Student Loan Refinancing vs. Income-Driven Repayment

To determine which option is best for you, it is helpful to evaluate the differences between student loan refinancing and income-driven repayment plans:

 

Interest Rate

Although either option may reduce your monthly student loan payment, the major difference between Income-Driven Repayment and student loan refinancing is the interest rate change.

 

Income-Driven Repayment will not lower your interest rate. Rather, it will remain the same throughout the life of the loan. Student loan refinancing, on the other hand, may reduce your interest rate for the remaining life of the loan.

 

Federal Benefits

With IDR plans, you are still eligible for federal benefits such as deferment, forbearance and forgiveness, although some private lenders also offer deferment and forbearance options.

 

Financial Costs

There is no cost to refinance, and you may even save on interest costs if you qualify for a lower rate. With an IDR plan, there is no cost to apply for a plan, but your loan balance may actually increase on certain plans. This can happen when your minimum payment based on your income is not large enough to cover the interest costs that are accumulating. The interest costs can be added to your loan and your loan amount will actually increase rather than decrease.

 

Payment

When you refinance, you have the option to select a fixed interest rate, as opposed to a variable rate, that will keep the payment the same throughout the life of the loan. On an IDR plan, there is uncertainty to what your payment amount will be each year, since you are required to update your income and family size. Your payment can change each year and your budget must account for it.

 

Bottom Line

When you want to lower your student loan payment, evaluate the options and decide which works best for your financial plans. Both options can make your payment more manageable, but each have different long-term outcomes.

6 Ways to Minimize Grad School Student Loan Debt

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Embarking on your grad school journey can be an exciting time because it puts you one step closer to your dream career. But paying for grad school may cause anxiety if you are borrowing loans to cover the costs.

 

According to the U.S. Department of Education, in 2020 the average student loan debt from a graduate degree was $84,300. However, the cost of school shouldn’t prevent you from achieving your dreams. Here are 6 ways to minimize your grad school student loan debt:

 

Minimizing Graduate School Debt

If you’re looking to graduate debt-free, here are a few tips for reducing your graduate school debt:

 

Apply for a Stipend

If you are trying to decide which school is right for you, do your research and find out which schools provide stipends for graduate students. Certain degree programs will provide a stipend for living expenses, which will help reduce the loans you will need to borrow. The stipends may be provided for conducting research or teaching a class as a graduate assistant.

 

If you are fortunate enough to receive a grad school stipend, make a budget to help maximize the value of it so you can cover most, if not all of your expenses. Use some of these next tips to minimize your expenses.

 

Earn Money Elsewhere

If getting a stipend is not possible, look into internships or a part-time job in your field of study. Although these may be low-paying options, working outside of school will not only bring in income that can help offset your costs, but will also offer you job experience.

 

Reduce School Expenses

Of course you know tuition and living expenses need to be considered when paying for grad school, but be sure to think about the extra expenses too. Textbooks most likely will still be a necessary item for your program but it doesn’t mean you can’t save on the rising costs.

 

Try to buy textbooks secondhand from your school’s bookstore or online. You may also be able to rent your textbooks if you don’t think you will need to refer to them in the future. Although the expense of textbooks can add up, you can find ways to keep more money in your bank account.

 

Your wardrobe may not come into mind when budgeting for the extra expenses, but it should be something to consider. You will most likely need professional clothing for future internships or recruiting interviews. Professional clothing may be stretching your budget but a necessary expense.

 

If you are looking to minimize your grad school debt, you may want to consider shopping for used clothing or see if your school has an option to borrow professional clothing. Some schools, such as the University of Northern Colorado and Manhattan College, offer such options.

 

Reduce Your Living Expenses

You may have thought your roommate days were gone once you graduated college. If you are considering grad school, however, living with a roommate can help lower expenses. A roommate may also be a built-in study partner if you choose to live with a fellow grad student.

 

To further reduce your living expenses, consider eating primarily at home. Although you may not have a lot of time for cooking when you are in grad school, when you consider the savings, it may be worth the effort.

 

Money Under 30 explains that eating out is about three times more expensive than cooking at home. This can add up to hundreds of dollars of savings each month. To help combat the problem of not having time, try meal prepping one day each week.

 

When curbing your eating out, remember a coffee habit can add up, too! If you are used to grabbing a cup of coffee from a shop on your way to class, instead try brewing some at home to save yourself an average of $2.99 each time. Every little bit of savings will help you minimize your grad school expenses.

 

Minimizing Student Debt After Graduation

If you have already finished grad school and it feels like you’re facing a mountain of student loan debt, you still have options to help reduce your debt.

 

Refinance Your Loans

If you have already graduated and are employed, refinancing student loans is a beneficial way to minimize your loan payments. Refinancing is when you obtain a new private student loan to pay off outstanding student loans, whether they are private student loans or federal. You can refinance just one loan or multiple loans.

 

One of the benefits of student loan refinancing is the chance to lower your interest rate, thereby lowering your monthly payment. It also helps reduce interest costs over the life of the loan, which can add up to thousands of dollars. If refinancing sounds like it could be a good fit for you, use the Student Loan Refinance Calculator* for an idea of how much you could save.

 

Research Employer Benefits

Seek out an employer that offers student loan repayment assistance. Some employers may provide you additional money, monthly or yearly, to help repay your loans.

 

If you receive any money from your employer for loan repayment, try to use it for extra payments towards your loan rather than for monthly payments. Making extra payments towards the student loan principal will reduce the balance, helping you pay them your loan off more quickly and save on interest costs.

 

The Bottom Line

Earning a graduate degree is a big accomplishment and something you should be proud of, but it doesn’t have to mean you will be paying for your education the rest of your life. Just using a few of these strategies can help minimize the financial burden of getting your degree and set you on a strong financial path. Good luck!

Starting a Business With Student Loans

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Starting a business with student loan debt presents some unique challenges. You may have difficulty securing funding for your business, or you may struggle to make payments on your educational debt while trying to sink money into your startup.

 

The good news is, it’s not impossible to become an entrepreneur while you’re launching your company. You don’t even have to pay off your student loans before starting a business.

 

You can explore ways to reduce your student loan debt and can pursue multiple funding options. These include the possibility of actually using student loans to start a business.  Here’s what you need to know:

 

Repayment Options When Starting a Business With Student Loan Debt

Starting a business with student loan debt presents a few challenges. You’ll need a plan to continue making loan payments in case your company doesn’t make money immediately. You’ll also need to decide how much of your own money you’d like to spend on your company.

 

Some of your options include the following.

 

Income-driven repayment

If you have federal student loans, choosing an income-driven repayment plan could be one of your best options when starting a business. With an income-driven plan, payments are capped at a percentage of your income. That means, if your company isn’t making much yet, your payments could be very low or even non-existent.

 

Depending on the specific income-driven plan you select, your payments could be as low as $0 per month. And after you’ve made enough on-time payments, eventually the remaining balance of your loan will be forgiven. Of course, if your business does well and your income goes up, your payments will rise. By then, however, you should be able to easily afford to foot the bill.

 

Student loan refinancing

Income-driven repayment plans are an option only for federal student loans. If you have private loans, you can’t change your repayment term without refinancing. However, when refinancing with a private student lender such as ELFI, you may be able to reduce your interest rate and lengthen your repayment term to lower your monthly payments.

 

You do need to qualify for a student loan refinancing based on your income and credit score. A cosigner could help if your income isn’t very high when your company is first getting off the ground. Also, be aware that if you opt for a longer repayment term, you may pay more in interest over time.

 

Student loan forgiveness for entrepreneurs

The federal government doesn’t offer student loan forgiveness specifically for entrepreneurs. You may, however, qualify for other programs that could help with your student loan debt.

 

If you work for a qualifying not-for-profit organization, for example, you could potentially earn Public Service Loan Forgiveness. If you decide to operate your business as a non-profit and you meet the requirements, PSLF could lead to the remaining balance of your federal student loans being forgiven after you make the requisite number of on-time monthly payments.

 

Student loan forbearance

Federal and private student loan lenders will sometimes allow you to temporarily pause payments on your loans. However, interest will keep accruing while your payments are paused, so you’ll end up with a larger balance to repay.

 

Borrowing to start a business

Borrowing to start a business can sometimes be a challenge if you have student debt. When you already owe money for student loans, some lenders may not be comfortable giving you a small business loan or a personal loan. The good news is, you may have multiple options for securing the funding you need.

 

Explore personal loan or business loan options

While it can be more difficult to get a personal or business loan if you have a lot of debt, it’s not necessarily impossible. A cosigner could up your chances of getting a personal loan, and a solid business model makes approval of a personal loan much more likely.

 

You may also be able to increase your chances of loan approval if you switch to an income-driven student loan repayment plan or refinance your loans. If doing either lowers your monthly payment, you become a more attractive borrower because your debt-to-income ratio is lower.

 

Use your savings

If you can save money before starting your business, you may be able to use the proceeds from your savings account to get your company off the ground without having to borrow. This can be challenging, but if you’re able to keep startup costs down, it may be doable.

 

Borrow from friends and family

Your loved ones may be interested in investing in your business if they have the money to do so. However, before you secure a loan from loved ones, make sure that everyone involved understands the loan terms. Make sure you and your family agree on when the loan will be paid back, what interest if any will be charged, and whether your loved ones will get any stake in the business in exchange for giving you money to get the doors open.

 

Seek funding from angel investors

Angel investors are willing to invest in startups that they believe have a solid business model and a great idea, but they’ll generally want an ownership interest in the company. You can share the risk of your startup if you can get angel investors interested, but you will have to give up some of your future potential profits.

 

Consider using student loans to start a business

If you are still in school, you may be able to divert some of your student loan funds to your new venture. If you live frugally and keep your cost-of-living below what the school projects, the extra money could be just what you need to get your startup off the ground.

 

Of course, you’re taking a risk with this approach since you’ll graduate with more student loan debt. The upside is, however, that the interest rate could be lower than on other types of loans and you can stretch repayment out over time.

 

On the other hand, it’s very hard to discharge student loans in bankruptcy, so if you get in way over your head in debt, you’ll have few options to wipe the slate clean.

 

Make smart choices when starting a business with student loans

When you’re starting a business with student loans, it’s important you’ve done the work to maximize the chances your company will be a success. If you have a solid business model and you’ve researched the logistics of what it will take to make a profit, hopefully your company will turn a profit and give you the funding you need to pay off your student debt easily over time.

 


 

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 Not-So-Scary Student Loan Repayment Strategies

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Paying off student loans can seem scary, especially when you feel like the balance is not going down fast enough. Luckily, these student loan repayment strategies can help you pay down your debt faster and save money in the long run. Here are 7 not-so-scary repayment strategies you can use to slash your student loan debt balance. 

 

Pay More Than the Minimum

Your student loans accrue interest daily, so your payment covers both principal and interest charges. To pay your loan off more quickly, pay more than the minimum to save on interest costs. Save toward this goal by making small lifestyle changes, for example, eating out one less time per week or cutting a subscription service you no longer use. 

 

Even just a few extra dollars per month can add up to big savings over time. When you do pay more than the minimum, just be sure your payment is attributed to the loan’s principal rather than to future payments. 

 

If you have federal loans on an income-driven repayment plan without loan forgiveness, paying more than the minimum can be especially helpful. Your minimum payment may not cover your monthly principal and interest expenses, meaning your loans could grow every month. 

 

Make Bi-Weekly Payments

Bi-weekly payments are a great way to make an extra student loan payment every year. This strategy will also help you save on interest costs. 

 

To try this method, divide your monthly payment in half and make that half-payment every two weeks. If you make a payment every two weeks, you will end up making 26 half-payments (52 weeks divided by 2) which is 13 full monthly payments in one year. 

 

If you’re using this method, make sure your half-payments are made before your due date so you don’t encounter late fees. Also be sure when you make an extra half-payment that it is applied directly to the principal of your loan. 

 

Enroll in Autopay

You have to pay your student loan payment every month either way, so you might as well save yourself some time and money in the process! Enrolling in autopay is the easiest way to accomplish both. 

 

Autopay allows your loan servicer to withdraw the minimum monthly payment directly from your bank account. If you have federal student loans, you will save 0.25% every month while autopay is set up. Some private lenders also offer a monthly discount, so check with your servicer to see if the option is available. This may not seem like significant savings but it can add up to hundreds of dollars over the life of the loan with no extra work on your part. 

 

Enrolling in autopay also helps you to avoid late fees. Your payment will always be on time as long as you have sufficient funds in your bank account. 

 

Refinance to Lower Your Interest Rate

Another student loan repayment strategy that can result in significant savings is refinancing. You can refinance one or multiple student loans, both federal and private. 

 

When you refinance, you obtain one new student loan to pay off your old loans. Your new loan may have a lower interest rate, which could result in thousands of dollars in savings. When you refinance, you can also change the term of your loan. 

 

By shortening your student loan repayment term, you’ll make larger monthly payments and save on interest over the life of the loan. Alternately, you can lengthen your student loan repayment term to reduce your monthly payments. Use ELFI’s Student Loan Refinance Calculator* to see how refinancing could impact your student loan repayment strategy. 

 

Ask Your Employer About Student Loan Assistance

An increasing number of companies are offering student loan repayment assistance as a benefit. Different employers offer different types of loan assistance. Many, however, make direct monthly payments to lenders or pay an annual lump sum to their employees. A majority of employer programs have a cap on the amount of assistance they will provide. 

 

If you are fortunate to work for a company that provides loan assistance, do your best to continue making your monthly payments. You can then consider employer assistance to be “extra” progress on your loan. This student loan repayment strategy enables you to make progress quickly.

 

Make a Lump Sum Payment with Found Money

Found money is any sum you receive outside of your regular paycheck. Examples include a bonus received at work, gift money you receive during the holidays or cash back from reward credit cards.

 

By now you know that making extra payments can help you pay your loans off more quickly and save on interest. By making extra payments with found money, you don’t have to find extra money in your budget. Applying money you did not expect to receive towards your debt will help you establish a stronger financial future.

 

Diversify Your Income Streams

You can diversify your income streams by starting a side hustle. While it will require some extra time and effort, if repaying your loan quickly is a top priority, this student loan repayment strategy is for you. 

 

A side hustle can take on any form, such as driving for a ride share company, selling items online or providing childcare. If you apply all your earnings from your side hustle towards your student loan debt, you will be able to reach your payoff goal faster.

 

Bottom Line

Implementing just one of these strategies will help you save money and pay your loan off more quickly. Student loan debt doesn’t have to be scary when you have a plan and use different repayment strategies to accomplish your goals.

 


 

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.

 

*Subject to credit approval. Terms and conditions apply.

Refinancing Private Student Loans

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Many individuals take out private student loans to finance their undergraduate or graduate school education. Once they have obtained their respective degrees and graduated, student loan payments will begin coming due, typically following a grace period. While many individuals will pay their student loans to their original lender with the same interest rates and terms as when they obtained their loans, many choose to refinance their private student loans to reduce their monthly payment, save on interest, or pay off their loans faster.

 

Refinancing private student loans is the process of taking a new loan out with a private lender, often with a different interest rate and loan term. This page will provide an overview of refinancing private student loans to help you determine whether you should consider it.

 

Should I Refinance Private Student Loans?

Refinancing private student loans is very similar to the process of consolidating student loans, which is when you combine multiple student loans into one loan with a weighted average interest rate. However, there are several potential benefits of refinancing private student loans that student loan consolidation does not offer. Here are a few of the benefits of student loan refinancing.

 

Lower Private Student Loan Refinancing Rates

Above all, the primary benefit of refinancing student loans is the potential to save money by lowering your interest rate. When you graduated from your respective program, the interest rates on your private student loans may have been higher than what private lenders currently offer to refinance student loans.

 

For example, if you took our $50,000 in private student loans at a 6.0% interest rate for a 20-year term, your monthly payment would be $358.22 per month, and you would pay a total of $85,971.73 over your loan term if all payments were made on time, with approximately $35,971.73 of that total being paid on interest alone. If you refinanced your $50,000 private student loans to the 20-year term with a 4.5% interest rate, your monthly payment would drop to $316.32 and you would pay just $75,917.93 over your loan term, with approximately $25,917.93 of that total being paid in interest. You would save $41.90 per month and $10,053.80 in interest costs.

 

The interest rate that is offered to you depends on a variety of factors that are typical when taking out a loan, such as your credit score, credit history, debt-to-income ratio, among other factors. Raising your credit score 50 or 100 points could make a considerable impact on how much you could save by refinancing private student loans. See how much you could potentially save by using our student loan refinancing calculator.*

 

Adjusting Your Repayment Terms

In addition to lowering your interest rate, refinancing private student loans also allows you to adjust the length of your loan term to fit your goals and budget. Typically, shorter loan terms come with lower interest rates, allowing you to save on interest over your loan term, while longer loan terms come with slightly higher rates, but allow you to save on your monthly payments. Here are three ways that adjusting your repayment can help you better manage your student loans.

  • Simplify repayment by combining loans. When you refinance your private student loans, you can consolidate or combine multiple loans into a single loan with a single monthly payment. This can help you better track your total loan balance and get a clearer look at your repayment timeline.
  • Extend your loan term to save on monthly payments. By extending your loan term, you can spread out your payments over a longer period of time, often allowing you to reduce the amount you pay monthly. Having this extra cash can allow you to use that money for other financial goals, such as saving for retirement or purchasing a home.
  • Shorten your loan term to save on interest and pay off your loan faster. Oppositely of extending your loan term, shortening your loan term can often allow you to lower your interest rate and will shorten the amount of time that interest accrues, allowing you to save on interest and pay off your loans faster.

 

Choosing a New Lender

Another benefit of refinancing private student loans is the opportunity to switch to a new lender who may have additional benefits, such as forbearance options in the case of financial hardship or superior customer service. For example, with Education Loan Finance, if you are unable to repay your loan because of financial hardship or medical difficulty, Education Loan Finance may grant forbearance for up to 12 months. Additionally, Education Loan Finance offers superior customer service in the form of readily available Personal Loan Advisors who can help you through each step of the refinancing process and guide you toward the right repayment plan. Keep in mind that refinancing student loans for the sole purpose of switching lenders may not be the best decision, especially if it costs you money. If you’re interested in refinancing student loans, learn more about Education Loan Finance.

 

Reasons Not to Refinance Private Student Loans

Refinancing private student loans can be beneficial to many people, however, there are certain circumstances in which this may not be the case. It’s important to understand whether refinancing private student loans will help you save on your student loans or pay them off faster.

 

For example, if you attempt to refinance private student loans and the interest rate you qualify for doesn’t either help you save in total interest paid, nor helps you lower your monthly payments, you may want to wait some time and improve your borrowing credentials before refinancing. In some situations, even if you are able to lower your monthly payments, but will be paying a significant amount more in total interest costs, you may want to consider if it’s the best solution. Likewise, if you are saving in total interest, but your monthly payment will be unmanageable, you may be at risk of missing payments or, even worse, defaulting on your loan. Additionally, refinancing with a new lender may cost you certain benefits that your current lender offers.

 

Consolidating Private Student Loans vs Refinancing

When you are attempting to adjust your student loan repayment terms, you may come across student loan consolidation options. While student loan refinancing and consolidation are similar in that you are combining multiple loans into one loan with a single lender, the two are not exactly the same. Learn more about the difference between student loan consolidation vs. refinancing.

 

Can I Refinance My Private Student Loans?

Anyone with private student loans can refinance them as long as they qualify by meeting a private lender’s specific eligibility requirements for refinancing student loans.

 

For example, in order to refinance with Education Loan Finance*, you must meet the following criteria at a minimum:

  • be a U.S. citizen or permanent resident alien without conditions and with proper evidence of eligibility.
  • be at the age of majority or older at the time of loan application.
  • have a minimum loan amount of $15,000.
  • have earned a Bachelor’s degree or higher.
  • have a minimum income of $35,000.
  • have a minimum credit score of 680.
  • have a minimum credit history of 36 months.
  • have received a degree from an approved post-secondary institution and program of study.

 

In conclusion, refinancing private student loans can be very helpful to individuals who qualify and are interested in saving money in interest or lowering their monthly payments. Learn more about student loan refinancing with ELFI to see if it’s right for you.

Should I Pay Down Credit Card or Student Loan Debt?

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Dealing with student loans can be incredibly challenging for many college graduates. According to Experian, Americans carry an average student loan balance of $35,359. On top of that, the average credit card debt is nearly $6,200, says the credit reporting agency. 

 

In most cases, targeting one debt at a time can help you pay off your balances faster and save you more money on interest. So should you pay down credit card or student loan debt first?

 

Here’s how to develop your strategy:

 

Should You Pay Off a Credit Card or Student Loan First?

In the vast majority of cases, it’s better to prioritize your credit card debt before your student loan debt. This is primarily because credit cards charge higher interest rates than student loans. 

 

Additionally, credit cards don’t have set repayment schedules, so it’s easy to add to your balance even while you’re paying them off. As a result, credit cards may keep you in debt for longer than student loans with firm repayment terms.

 

For example, let’s say you have the following debts:

 

  • A credit card balance of $7,000 on an account with a 20% annual percentage rate (APR) and a $120 monthly payment.
  • Combined student loans worth $30,000 with a weighted-average rate of 6.5% and a $341 monthly payment. 

 

In total, your minimum monthly payment would be $461, and if you were to pay just that amount and add no new debt to your credit card, you’d pay off the student loans in 10 years and the credit card in a little more than 11 years. You’d also pay a total of $24,739 in interest over that time.

 

Now, let’s say you could afford to put $510 toward your debt every month. If you were to add the extra payment toward your credit card debt until it was paid down, your balance would be paid off in a little under six years. Then if you use the total amount you were putting toward your card toward your student loans, you’d pay those off about a year and a half early. You’d also save $9,643 in interest.

 

If you were to do the opposite and focus on your student loans first, you’d pay those off sooner, but the higher interest rate on your credit cards will result in more total interest charges. 

 

You can use a debt avalanche calculator to find out what you could save with your specific situation.

 

Can You Pay Off Student Loans with a Credit Card?

Another thing you may be wondering is, can you transfer student loans to a credit card? The U.S. Department of the Treasury doesn’t allow federal student loan servicers to accept credit cards as a payment method, and it’s unlikely you’ll find a private lender that offers it as an option.

 

But you still can technically use a credit card to pay off a student loan by using the balance transfer feature. 

Many credit card issuers send out blank balance transfer checks that you can use to pay off other credit card accounts or other types of debt. These checks often include an introductory 0% APR promotion, which could potentially save you money as you pay down your balance.

 

To use one to pay off student loans, you’d write the check out to your loan servicer and submit it as payment or write the check to yourself and deposit it into your checking account, then make a payment.

 

But just because it’s possible to do this doesn’t mean it’s a good idea. In fact, you’ll be hard-pressed to find a scenario where using a credit card balance transfer to pay off a student loan is the right move. Here’s why:

 

  • Balance transfers come with fees, which can range up to 5% of the transfer amount.
  • If you don’t pay off the balance before the promotional period ends, you’ll be stuck paying a higher interest rate, which can be in the mid teens or even upwards of 20%, on the remaining balance. 
  • The lack of a set repayment term on a credit card can make it more difficult to stick to your repayment plan and keep you in debt longer. 

 

In other words, if you have credit card debt, using a balance transfer credit card to pay it off interest-free is generally a good idea. But it’s not worth doing the same thing with your student loan balance.

 

If you have a cash-back rewards credit card, you can also opt to use your rewards to help pay down your student loans. 

 

Using Your Credit Cards Wisely While You Have Student Loan Debt

In an ideal world, you’d never carry a balance on a credit card because when you pay your bill in full every month, you’ll avoid interest charges. But if your financial situation is tight because of student loan debt and other obligations, it can be difficult to avoid. 

 

Whether or not you can afford to avoid credit card debt right now, here are some tips to help you limit your exposure to the risks they present:

 

Always pay on time

Even if you can just make the minimum monthly payment, paying on time will ensure that you don’t get slapped with late fees and a ding to your credit score. If you do miss a payment, make sure to get caught up quickly — you won’t avoid a late fee but late payments aren’t reported to the credit bureaus until they’re past due by 30 days.

 

Try to avoid a high balance

Your credit utilization rate is the percentage of available credit you’re using at a given time. So if you have a $1,000 balance on a card with a $2,000 credit limit, your utilization rate is 50%. There’s no hard-and-fast rule for what your rate should be, but the higher it is, the more damage it will do to your credit score. So if you can, try to keep your balance as low as possible relative to your credit limit.

 

Seek lower interest rates

As you work to pay down credit card debt, a balance transfer card with a 0% APR promotion can be a great way to save money on interest charges, even if you can’t pay the balance in full before the promotional period ends. If you can’t qualify for a balance transfer card, you may try to call your card issuer and see if you can get a reduced interest rate. There’s no guarantee your request will be granted, but credit card companies will sometimes offer a lower rate for at least a short period.

 

Avoid using your card as you pay it off

If you keep adding charges to your credit card while you’re paying down the balance, it can feel like you’re taking two steps forward and one step back. If you can, try to stick to using cash or your debit card while you pay down your debt — at least for most of your expenses — to make it easier to achieve your goal.

 

As you take these steps, you’ll be able to avoid some of the drawbacks that come with using credit cards regularly. They’ll not only help preserve your credit score but also make it easier to pay off your balance, so you can turn your focus to your student loans.

 


 

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.