ELFI is monitoring the Coronavirus (COVID-19) outbreak and following guidance from state and federal agencies. If you have been impacted by the Coronavirus, our Customer Care Center is available to help you.
×
TAGS
Student Loan Refinancing

How Does Student Loan Refinancing Work?

July 18, 2019

By Caroline Farhat

 

When you agree to take out a student loan, you also sign on to a specific set of terms and conditions that cover things such as your payment schedule and the interest you’ll pay on your loan. These terms represent the obligations of the borrower and cosigner until the loan is completely paid off. Interest rates for federal student loans are determined by the government, whereas private lenders will set their terms according to your credit score (or that of a cosigner).

Can I Change my Loan Terms?

Before graduating, you probably didn’t give much thought to student loan repayment terms. That being said, student loan terms that fit your needs and goals before starting school aren’t always ideal for you following graduation. For this reason, it is possible to change your loan terms after you graduate, and if you’re approved for a new loan, the new loan servicer pays the old loan servicer for the cost of the loan. The student loan debt is then transferred to the new loan servicer. With the new loan typically comes new and better student loan terms.

 

Why Should I Refinance my Student Loan?

Simply put, student loan refinancing works when you can take out a new loan in order to pay off the first loan with better terms. Here are four reasons why you might want to refinance your student loan:

Your Credit Score Has Improved Since College

Student loans provided by the federal government don’t take credit scores into account – every borrower is given the same interest rate regardless of credit history. If you have taken out a private loan, your interest rate could have been impacted by your or your cosigner’s credit score. After a few years in the workforce, your credit score usually improves. An ideal time to refinance your student loans is when your credit score exceeds 650. This should enable you to refinance your loan at a lower interest rate. Most student loan refinance companies will require a minimum credit score for refinancing approval, so be sure to seek that information out before applying.

A Longer Credit History Could Improve Your Interest Rate

Interest rates for private student loans are usually affected by your or your cosigner’s demonstrated credit history, and most student loan refinance companies will provide a minimum credit score to apply for refinancing. A refinancing company will also usually provide favorable terms to a borrower who has illustrated a financially responsible credit history – for example, by paying bills on time. An individual who has multiple defaults on their credit history is likely to receive less favorable terms or be turned down for refinancing.

Overall Interest Rates May Be Lower

Interest rates for student loans are tied to certain economic indicators at the time you applied for the loan. So, you may have a student loan with an above-average interest rate because you went to college when interest rates were high. When interest rates decrease because of changing economic conditions, you will almost certainly be able to refinance and get a better deal on your new loan.

Consolidation

Refinancing gives you the option of consolidating several loans with different interest rates into a single loan with a more favorable interest rate. One loan with one interest rate is much easier to manage.

 

Fixed and Variable Interest Rates

When you apply to refinance your student loan, you can choose between a fixed or a variable interest rate. A fixed rate doesn’t change unless you are refinancing again. A variable rate will fluctuate over time based on certain economic indicators. Variable rates coincide with low-interest rates across the economy, and they can sometimes fall to below 3%. If you find yourself with a high income and interest rates are declining, then it may be possible to get a great refinancing deal. This works by choosing a variable interest rate and paying off your loan entirely before interest rates start rising again, or by taking advantage of a low fixed interest rate and sticking with it.

 

Avoiding the Risks of Refinancing Student Loans

Refinancing your student loan can be a great choice, but there are some risks you want to watch out for:

  • High-interest rates. If interest rates are high, you might end up paying more over time than if you had stayed with your original loan.
  • Too many fees. Make sure that refinancing fees don’t outweigh the savings from your lower interest rate. Look for student loan refinancing that comes with no fees.
  • Unrealistic repayment schedules. Federal student loans provide you with access to repayment plans based on a low yearly income. Make sure that you can meet the monthly payments on your refinanced loan.

 

When Should I Refinance my Student Loan?

The primary reason to refinance your student loan is to shift into a much more favorable loan. That loan could have a lower interest rate and save you money. Additionally, if you qualify, you’ll have the flexibility to adjust the repayment terms. This means that you could pay the loan off with a shorter term or extend the term so it costs you less every month or is easier to manage.

Use ELFI to Refinance Your Student Loans

You may be pleasantly surprised at how easy it can be to repay your loan faster and more effectively. Doing so can help you avoid the stress of too much student loan debt and enjoy a more prosperous financial life. It can be hard to tell when the best time to refinance your student loan is, so click here for a handy student loan refinancing calculator to determine how much you might save. For a no-obligation consultation, call ELFI at 1.844.601.ELFI.

 

Learn More About Student Loan Refinancing

 

Terms and conditions apply. Subject to credit approval.

 

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

Leave a Reply

Your email address will not be published. Required fields are marked *

Person reading news about student loans in coffee shop
2020-05-15
This Week in Student Loans: May 15

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:
person calculating the savings when refinancing

Consumers are refinancing loans as a form of personal stimulus

Despite the economic callout due to the coronavirus pandemic, Americans are using historically low interest rates to refinance their loans as a form of personal stimulus during the pandemic. The article explains how mortgage refinancing volume has skyrocketed and how the low-interest rate environment is also applying to student loan refinancing.  

Source: Yahoo Finance

 

Government building

House Democrats scale back $10,000 student-loan-forgiveness measure

On Thursday, House Democrats introduced an amendment to their $3 trillion coronavirus relief spending package that significantly scaled back a student-debt provision, also known as the HEROES Act, because of its higher-than-expected cost.  

Source: Business Insider

 

Government proposing HEROES Act

HEROES Act promises 5 ways to help your student loans

As mentioned above, House Democrats proposed a new $3 trillion stimulus bill called the HEROES Act to provide financial assistance to Americans due to the coronavirus pandemic. Read about the five changes this act includes in the Forbes article.  

Source: Forbes

 

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

Coronavirus pauses federal student loans for 6 months — should you pay anyway?

The CARES Act put a pause on all student loan payments through September 30 – but should you pay anyway? This Fox Business article argues that if you have the financial means to do so, you might consider continuing to repay your school loans or even refinance your student loans in a low interest rate environment.  

Source: Fox Business

    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.

2020-05-14
A Nurse’s Guide to Student Loan Refinancing

As the COVID-19 pandemic has highlighted, nurses play a critical role in our healthcare system, caring for patients, coordinating treatments, and keeping detailed records.   
By Kat Tretina
Kat Tretina is a 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.
  The demand for skilled nurses is only going to grow. According to the
U.S. Bureau of Labor Statistics, the job outlook for registered nurses is projected to increase by 12% by 2028, much faster than average. And, nurses can command high salaries. As of 2019, the median salary for registered nurses was $73,300 per year, significantly higher than the median wage for all occupations, which is just $39,810.    While you likely had to take out student loans to pay for your nursing education, your higher-than-average income makes you a strong candidate for student loan refinancing. Consolidating your debt can allow you to save money and pay off your loans sooner so that you can focus on your other financial goals.   

Why you should refinance student loans after nursing school

Becoming a registered nurse typically requires only a bachelor’s degree. But if you want to become an Advanced Practice Nurse, nurse administrator, or nurse educator, you’ll need a master’s degree   Graduate student loans tend to have higher interest rates than other types of education loans, causing more interest to accrue and your loan balances to grow over time. For example, the interest rate on federal Grad PLUS Loans disbursed between July 1, 2019, and July 1, 2020, is 7.08%.    If you have high-interest debt, refinancing can help you tackle your loans and lower your interest rate. With a solid income as a nurse and a good credit history — or a cosigner willing to apply for a loan with you — you can qualify for a lower rate and save money over the life of your repayment term. In fact, our customers reported that they saved an average of $272 every month and should see an average of $13,940 in total savings after refinancing their student loans with ELFI.   

How to refinance nursing school loans

You can refinance your nursing school loans in just five steps:   

1. See if you meet the lender’s eligibility requirements

Refinancing lenders all have their own borrower criteria, so it’s a good idea to review their requirements ahead of time to ensure you’re eligible for a loan. At Education Loan Finance, you must meet the following conditions: 
  • You must have at least $15,000 in student loans
  • You must earn at least $35,000 per year
  • Your credit score must be 680 or higher
  • Your credit history must be at least 36 months old
  • You must a bachelor’s degree or higher from an approved college or university
  • You must be a U.S. citizen or permanent resident
  • You must be the age of majority — 18 years old, in most states — or older 
  • You must have a debt-to-income ratio low enough that you can afford your monthly loan payments
 

2. Consider asking a cosigner for help

When you apply for a refinancing loan, the lender will perform a credit check. If you don’t have an extensive credit history, or if your credit score is too low, you may not be able to qualify for a loan on your own, or you may not qualify for a competitive interest rate.    However, there is a workaround — you can add a cosigner to your loan application. A cosigner is a parent, relative, or friend with good credit who signs the loan application and assumes responsibility for the loan if you fall behind on the payments. Having a cosigner increases your odds of the lender approving you for a loan and qualifying for a lower rate.   

3. Get a rate quote

To find out what kind of loan terms you can get, use ELFI’s Find My Rate tool. By entering basic information about yourself, you’ll get an estimated rate in just a few minutes without affecting your credit score.*    You can see how different factors, like loan term and choosing a variable or fixed interest rate, can affect your monthly payment and total repayment amount.   

4. Gather documentation

Once you find a loan that works for your budget, you can move forward with the loan documentation. To speed up the process, make sure you have the following documents on hand: 
  • Recent pay stub or proof of employment
  • W-2 forms
  • Tax returns (if self-employed)
  • Government-issued ID, such as a driver’s license
  • Loan account information, such as loan servicer name and account number
  • Current loan billing statement or payoff letter
 

5. Submit your loan application

To complete the application, you’ll have to enter personal information about yourself, including your address, birthdate, and Social Security number. You’ll also have to include information about your employer and income.    Once you submit the application, ELFI’s team will review the form and contact you with either an approval or denial. Until the loan is approved and disbursed, continue making payments to avoid late fees and penalties.   

6 other options for managing your loans

While student loan refinancing can be a smart way to pay down your loan balance and save money, it may not be right for you. If you decide against refinancing your education debt, there are alternative strategies for managing your loans.   

1. Nurse Corps Loan Repayment Program

Under the Nurse Corps Loan Repayment Program, the Health Resources and Services Administration (HRSA) will pay up to 85% of your unpaid nursing education debt. In exchange, you must commit to working for at least two years in a critical shortage facility or serve as nurse faculty in an eligible school of nursing. For more information, visit the HRSA website  

2. Public Service Loan Forgiveness (PSLF)

If you work for the government or a non-profit organization, such as some hospitals, you may be eligible for loan forgiveness through PSLF. Under PSLF, the government will forgive your federal loans after you work for an eligible employer for ten years while making 120 qualifying monthly payments.    To find out if your employment and loans are eligible for loan forgiveness, use the PSLF Help Tool  

3. State student loan repayment assistance programs

To recruit nurses to work in areas with shortages of healthcare workers, some states offer student loan repayment assistance programs in return for work commitments.    For example, registered nurses in Kentucky can receive up to $20,000 in tax-free loan repayment assistance if they agree to work for two years at a location in a rural and underserved area.    In Florida, nurses can receive up to $4,000 for every year they work at a designated employment site or facility. Eligible nurses can participate in the program for up to four years, and get up to $16,000 in loan repayment assistance.    To find out if your state offers a similar program, visit your state’s department of health or education websites.   

4. Income-driven repayment plans

If you took out federal student loans to pay for your undergraduate or graduate degrees and can’t afford your current monthly payments, you might be eligible for an income-driven repayment (IDR) plan. With an IDR plan, your loan servicer will extend your repayment term and base your payment on your family size and discretionary income.    Federal loan borrowers can apply for an IDR plan online.   

5. Use your sign-on bonus to make extra payments

Depending on your location, you may be eligible for a sign-on bonus. In some areas, nurses are in high demand, and understaffed hospitals and healthcare companies offer sign-on bonuses to attract talented nurses to work for them. You could qualify for a bonus of $10,000 or more on top of your regular salary.    According to AdventHealth, a major hospital network, sign-on bonuses for nurses aren’t usually issued as upfront payments. Instead, they’re broken up into installments over a service period, such as four payments over two years. But if you use those payments to make extra payments on your student loans, you can save money on interest and pay off your debt early.    You can find nursing jobs that offer sign-on bonuses on Indeed  

6. The Student Loan Forgiveness for Frontline Health Workers Act

On May 5, 2020, Rep. Carolyn Maloney, a Democrat in New York,introduced the Student Loan Forgiveness for Frontline Health Workers Act. If passed, this bill would discharge all federal and private loans belonging to healthcare workers who interacted with COVID-19 patients, including doctors, nurses, and technicians.    The bill’s future is unclear, but it does signal that there is growing pressure on lawmakers to help healthcare workers — especially those on the frontlines of the pandemic — pay down their student loan debt.   

Repaying your student loans

As a nurse, your career is taxing enough; don’t let your student loans weigh you down. Student loan refinancing can give you significant relief from your debt. You can save money, pay off your debt, and even lower your monthly payment.    To find out how much you can save, use the student loan refinance calculator.*  
  *Subject to credit approval. Terms and conditions apply.     Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
photo resembling economic downturn
2020-04-29
Should I Refinance Student Loans in an Economic Downturn?

The COVID-19 outbreak has had a significant impact on the economy, causing many people to lose their jobs and struggle to make ends meet.    By Kat Tretina   While the Coronavirus Aid, Relief, and Economic Security (CARES) Act gave some relief to federal student loan borrowers — including suspending loan payments and waiving interest charges for six months — those provisions won’t last forever. Under the current legislation, the CARES Act protections will expire on September 30, 2020   If you’re looking for a long-term solution for managing your debt, student loan refinancing is a popular strategy. But does it make sense during an economic downturn? Here’s what to consider.   

Should I refinance student loans? 5 questions to ask first

Before moving forward with your refinancing application, ask yourself these five questions.   

1. What kind of loans do you have? 

What kind of loans you have will impact what protections and benefits are available to you.    If you have federal student loans, you may be eligible for protections under the CARES Act, meaning your payments are suspended until September 30, and interest charges are waived.    Since you don’t have to make payments and interest isn’t accruing, it may not make sense to refinance right now. Instead, it may be wiser to wait until the CARES Act provisions expire to refinance your debt.    However, not all student loans are eligible for the CARES Act benefits. Private student loans and some federal loans, such as Perkins Loans and commercially-owned FFEL Loans, don’t qualify for payment suspensions or interest waivers. If you have that kind of debt, refinancing right away can help you save money and pay down your loans.   

2. How secure is your job? 

During an economic downturn, the job market can become volatile. If you’re at risk of losing your job, it’s important to keep your federal loans where they are so you can take advantage of the CARES Act and federal forbearance and deferment protections.    If you have private loans, refinancing can actually be a good idea. When you refinance, you can move your loans to a new lender that offers more generous repayment options, such as longer repayment terms and financial hardship forbearance. For example, if you are unable to repay your loans because of a financial hardship or medical issue, ELFI may grant you forbearance for up to 12 months.    If your company is relatively secure, you can also encourage your employer to offer student loan repayment assistance to recruit and retain top talent. With ELFI for Business, companies can offer this benefit as part of their compensation packages and take advantage of the tax provisions in the CARES Act that benefit employers.   

3. Do you have an emergency fund? 

Refinancing your student loan debt can accelerate your debt repayment. If you make extra payments toward your loans, more of your payment will go toward the principal rather than interest, cutting months or even years off of your loan term.    However, putting extra cash toward your debt during a recession may not be the best course of action. If you don’t have a substantial emergency fund, you’re likely better off stashing your money into a savings account until you have at least three to six months’ worth of expenses saved.    Once you have a fully-funded emergency fund, then you can focus on paying down your debt.   

4. Do you have good credit or a cosigner? 

Refinancing rates are rapidly dropping, so you can dramatically reduce your interest rate when you refinance your student loans.    However, to qualify for the lowest rates, you’ll need to have excellent credit. If your credit is less-than-stellar, or if you don’t have an established credit history, you can still qualify for a loan and get a competitive interest rate by adding a cosigner to your loan application.    A cosigner can be a parent, relative, or even a good friend with a good credit score and stable income. They apply for the loan with you and agree to make payments if you fall behind. Because they’re backing you on the loan, there’s less risk to the lender, allowing you to get a lower interest rate than you’d get on your own.   

5. What are your goals for refinancing? 

When the economy is in decline, it’s essential that you’re very clear about your financial goals. Before refinancing your debt, think about what you want to accomplish. There are three main benefits of student loan refinancing:   
  • You can pay off your debt earlier: With a lower interest rate, more of your payments go toward the principal. If you stay consistent with your payments, you can pay off your student loans ahead of schedule, becoming debt-free sooner. During a recession, not having any debt is a major advantage. 
  • You can save money over the life of your loan: When you refinance your debt and qualify for a lower interest rate, you can save thousands over the length of your repayment term. You can use the money you save to pursue other financial goals, like investing or buying a home. Use the student loan refinance calculator to find out how much you can save.* 
  • You can reduce your minimum monthly payments: If your monthly payments are too high right now, refinancing can make them more manageable. By getting a lower interest rate or extending your repayment term, you can significantly reduce your minimum monthly payment and get more breathing room in your monthly budget. 
   

Refinancing your student loans

Even though the country is going through a significant economic crisis, student loan refinancing can still be an effective way to manage your debt in certain situations. Before refinancing, carefully evaluate your situation and what protections are available for your loans to ensure it’s the right decision for you.    If you decide that refinancing makes sense, use the Find My Rate tool to get a rate quote.*  
  *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.