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Financial Aid Options for Middle-Income Families

October 21, 2019

It’s no secret that college comes with a hefty price tag. Every year, families have to figure out how they’re going to pay thousands of dollars in school bills. While some may have the resources to pay tuition, many just do not have that kind of money lying around. Thankfully, there are plenty of options when it comes to reducing the cost of college. We’re sharing the steps middle-income families can take to secure various types of financial aid.

 

FAFSA

If you’re looking for financial aid options, you should start by filling out The Free Application for Federal Student Aid, better known as the FAFSA. Even as a middle-income family, you may still receive some need-based aid, especially if your student plans on enrolling at a higher-cost school. Further, many scholarships require the student to fill out the FAFSA anyway. Over $120 billion are awarded through federal grants, work-studies and loans every year, so why not throw your name in the hat? The FAFSA opens October 1 every year, and you can apply as early as the year before your child’s first day of college. The earlier you apply, the more likely your child is to receive financial aid.

 

Scholarships

Perhaps the best thing your child can do is research and apply for scholarships, and it pays to go local. Many locally-owned businesses and organizations offer scholarships for graduating high school students. You or your spouse could also ask your employer if they provide any scholarships or financial aid for employees’ children. After exhausting local options, your child may want to research national opportunities. A quick web search could reveal countless free scholarships – Niche®, Fastweb®, and eCampusTours® are an excellent place to start. Just remember, scholarships are not exempt from internet scams, so do your research and make sure they’re legitimate. The FTC warns families to be cautious if the following lines are included in the application:

  • “The scholarship is guaranteed or your money back.”
  • “You can’t get this information anywhere else.”
  • “I just need your credit card or bank account number to hold this scholarship.”
  • “We’ll do all the work. You just pay a processing fee.”
  • “The scholarship will cost some money.”
  • “You’ve been selected” by a “national foundation” to receive a scholarship – or “You’re a finalist” in a contest you never entered.

Source: FTC

 

Finally, seek out the colleges that offer the best financial aid packages. Student Loan Hero recently highlighted 50 U.S. Colleges With the Most Generous Financial Aid Packages, and yours may be on their list! If it’s not, reach out to your school’s financial aid office, and they’ll be happy to provide you with all of your options.

 

Tuition Discounts

While you’re asking about scholarships, inquire about tuition discounts.

 

Sibling Discounts: Sometimes, if more than one child is enrolled at the same college or university, the school may offer a tuition discount. Often the discount is only applied to one sibling’s tuition, but it is still helpful for the family’s overall finances. These discounts can range from a flat rate to a percentage off each semester or each year. If your children are planning on enrolling at the same school, this option is worth seeking out.

 

Military Discounts: Colleges may also offer discounts to military veterans and their families. The Veterans Access, Choice and Accountability Act of 2014 ensures veterans and dependent family members will not be charged out-of-state tuition if they meet specific requirements. Again, check with the school’s financial aid department to see if they offer “military-friendly” discounts.

 

Alumni Discounts: If you attended your child’s school of choice, your child may be eligible for scholarships, discounts, or other benefits. Many colleges have legacy programs, competitive scholarships, or even special legacy tuition rates. If you have other family connections to the university like grandparents, make sure you talk to an admissions counselor about the financial aid options available.

 

Tax Rewards

Middle-income families are perfectly positioned to receive tax credits for college expenditures. For example, the Lifetime Learning Credit provides a 20 percent tax credit for the first $10,000 in yearly, qualified tuition expenses. Programs like this, as well as tuition savings plans, offer a few different ways for middle-income families to receive tax benefits.

 

Federal Loans

If you’ve taken advantage of all your aid options and find you still have a debt to pay, it may be time to consider loans. Non-need based federal loans such as the Unsubsidized Federal Stafford Loan for students and the Federal PLUS Loan for parents can bridge whatever gap you find in your aid and your expenses. Federal education loans generally have low-interest rates or may be tax-deductible, so they’re a smart alternative to using a credit card, for example.

 

Private Loans

You may find that you still need financial assistance after exhausting all the options above. If that’s the case, private student loans may be an option. We always recommend you take advantage of grants, scholarships, and federal aid before taking out a private student loan. To learn more about ELFI’s private student loan options1, click here.

 

Other Qualifications

Remember that financial aid in the form of discounts and scholarships aren’t always one and done. Even if you’re getting a scholarship based on your family history or some type of local competitive scholarship, you may be required to meet certain qualifications to receive the money. Sometimes you might be required to complete a number of service hours or stay enrolled in school full-time to keep your scholarship, for example. Make sure you know any additional qualifications or requirements before applying for the scholarship or another type of aid – you don’t want to be caught off-guard.

 

The cost of college can present a challenge for families at all income levels. If you find yourself in that position, don’t despair. The options in this article are a good place to start searching for financial assistance. No matter what, don’t lose sight of the end goal: getting a degree and ultimately establishing a sustainable career. If you’re already looking for financial aid, you’re well on your way.

 

 


1Subject to credit approval. Terms and conditions apply.

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2019-12-11
Holiday Budgeting: Gift Ideas That Last Into the New Year

Unless you’re one of those people who had their holiday shopping done by December 1, you’re like the rest of us who spend 25 days scrambling around, balancing holiday parties, school finals, baking cookies, traveling, and shopping for gifts. Gift-giving is one of most festive-feeling and most stressful of holiday traditions. It’s also likely what brought you to this blog. As a recent college graduate, with an entry-level paycheck and mountain of student loan debt, it’s difficult to gift well without destroying your monthly budget. Check out our list of possible presents that are money-conscious and aren’t likely to get returned (or thrown out with the wrapping paper).

 

Give Experiences

It’s no secret the U.S. is a country of “stuff.” We fill our homes, garages, and eventually, storage units with items that we just know we’ll use again someday. While the newest iPhone® or New York Times® Bestseller might make your family and friend’s faces light up this December, once the next model comes out or the last page is read, those gifts become obsolete. 

 

 So instead of blowing your hard-earned income and monthly budget on more “stuff,” consider giving experiences: concert tickets, zoo memberships, or woodworking classes that your recipient will remember longer than they will the plot of that over-rated biopic. What’s even better: you can experience these things together. If you’re looking for more experiences to gift this holiday season, check out Huffington Post’s article, 21 Gift Ideas For People Who Value Experiences More Than Things. You can find a more holistic approach to experiential gift-giving for the mind, body, and soul in this ELFI blog.

 

Give Savings 

While not the most glamorous gift, receiving a contribution towards your student loan debt really is the gift that keeps on giving. Helping put a dent in student loan debt is more thoughtful than cash or a gift card snagged while checking out at the grocery store, and it can help you pay off those student loans faster. 

 

If your parents, grandparents or significant other made a student loan payment in your honor for the next two-three years for the holidays and your birthday, thousands of dollars could be shaved off of your student loans. Getting out from under student loan debt faster also means more fun money in your checking account to boost that monthly budget and buy the gifts you really want to give. 

 

If you’re like the many students who took out multiple federal and private student loans over the course of college, it may be a good time to consolidate and refinance student loans into one singular loan. Besides possibly scoring a better repayment term and interest rate, seeing the family contributions to paying off the debt could really jumpstart your 2020 goal of getting more financially fit. 

 

REgive Gifts

Re-gifting gets a bad wrap for being the lazy person’s way of shedding the unwanted junk in their house. However, with a little extra thought, re-gifting can be a fulfilling experience. Look past the junky toaster on your kitchen counter or clothes you hate and consider items that are in good condition, but no longer bring you joy or serve a purpose in your home. Maybe it’s an old CD that you and your dad listened to before you left for college. Maybe it’s an Instant Pot® that you really thought you’d use more of in 2017. Or maybe it’s a necklace your friend always compliments. Whatever it is, clean them up, wrap them nicely, and—whatever you do—be sure your friend or family member didn’t give you the item first. The secret to successfully re-gifting is to be upfront and honest about the gift being from your own personal department store and share why you did it.

 

Give Time

The holiday spirit is all about being with the ones you love and being generous to those in need. If you or your family are feeling stressed to maintain monthly budgets this year, consider scrapping gifting (in the traditional sense) altogether. There are countless organizations that take volunteers throughout the holiday season to distribute presents in hospitals, cook meals for the homeless, and even shovel snow or hang Christmas lights for the elderly. By giving time, you make connections in your community, spread cheer, and build karma for the new year. 

 

If you’re still feeling stressed about ruining your perfectly planned monthly budget this holiday season, consider student loan refinancing. Recent graduates have reported saving an average of $309 every month after their student loan refinance with ELFI*, which averages out to $20,936 in total savings.¹ And because this is the busy time of year, you can see your potential savings and see if you are prequalified for a student loan refinance in minutes. Happiest of holidays to you and yours!

 
 

*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 a number of factors.

 

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

2019-12-10
Student Loan Repayment: Debt Snowball vs. Debt Avalanche

By Kat Tretina

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

 

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

 

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

 

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

 

The difference between the debt snowball and debt avalanche strategies

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

 

Debt avalanche

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

 

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

 

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

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

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

 

Debt snowball

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

 

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

 

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

 

Pros and cons of the debt avalanche method

The debt avalanche strategy has several benefits and drawbacks:

 

Pros

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

Cons

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

Pros and cons of the debt snowball method

The debt snowball method has the following pros and cons:

 

Pros

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

Cons

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

Which strategy is best for paying off student loans?

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

 

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

 

Managing your student loan debt

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

 

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

 

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

 
 

*Subject to credit approval. Terms and conditions apply.

 

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

2019-12-04
Tips for Starting Your Student Loan Repayment Journey

Once you graduate from college, leave college, or drop below half-time enrollment, it’s time to start thinking about when your student loan repayment period kicks in. Understanding the repayment process for your student loans is very important for a number of reasons – for one, if you don’t pay, your interest will accrue. Second, if you don’t pay, it will affect your credit score, which can hinder your ability to buy a home, buy a car, qualify for credit cards, take out a personal loan, or refinance your student loans.   If you graduated this past spring, your student loan repayment period will likely start around this time of year (if they haven’t kicked in already). Follow these tips to master student loan repayment and get yourself to a strong financial start after college.  

Know How to Access Your Loan Information

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

Know When Your Payments Start

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

Weigh Repayment Options

When you take out federal student loans and your grace period is complete, you will automatically enter the Standard Repayment Plan. This plan allows you to pay off your debt within 10 years, with the monthly payment remaining the same over the life of the loan. If standard repayment doesn’t work for your budget, you may want to consider some other options, or perhaps even refinance your student loans. The federal student loan program offers the following Income-Based Repayment plans: 
  • Graduated Repayment Plan – Gives you a smaller payment amount in the beginning and gradually increases the payment amount every two years.
  • Extended Repayment Plan – Allows you to pay the least possible amount per month for 10 to 25 years.
  • Revised Pay As You Earn Repayment Plan or REPAYE Plan – Bases the monthly payment on you (and spouse’s) adjusted gross income, family size, and state of residence.
  • Pay As You Earn or PAYE – Monthly payments are based on your adjusted gross income and family size. You must be experiencing a financial hardship to qualify. You must also be considered a “new borrower” as of 10/1/2007 or after, or be someone who received an eligible Direct Loan disbursement on 10/1/2011 or after.
  • Income-Based Repayment or IBR – Monthly payments based on your adjusted gross income and family size. Must be experiencing a financial hardship to qualify.
  • Income-Contingent Repayment or ICR – Based on your monthly adjusted gross income and family size. Typically chosen if an individual can’t qualify for the Pay As You Earn Plan or Income-Based Repayment.Any changes to your income or your spouse’s income will affect your student loan payment. For example, if your salary increases, your student loan payment will as well. If you are married, both your income and your partner’s income are combined. Two combined incomes will increase your total income, likely increasing your monthly payment. 
  Keep in mind that each repayment option will have positives, negatives, as well as eligibility requirements. Research each option before making a decision, and consider contacting your loan servicer if you have questions or need more information.   

Automate Your Payments (If you can)

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

Make Extra Payments

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

Reach Out for Help if Necessary

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

Weigh Refinancing & Consolidation Options

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

Look Into Loan Forgiveness

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

Earn Your Tax Benefits

If you are paying your student loans, you may be able to deduct the interest you pay on your student loans when filing your taxes. Deductions reduce your tax liability, saving you money and serving as a nice tradeoff for having to pay interest on your student loans.    Repayment of student loans can be a long, difficult journey – but by taking advantage of your resources and staying determined to pay off your debt, it is manageable. If you need more information on paying back your student loans or the options that are available to you, contact your loan servicer.  
  Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.