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Student Loan Refinancing

Refinancing Student Loans to Buy Your First Home

February 4, 2020

So, you’re ready to buy your first home? Look at you all grown up and wanting to be smart with your money. The truth is, you were smart enough to invest in your future by working hard for your degree(s), and now you want to double down and dig in some roots. But you may be wondering how you’re going to juggle both a mortgage AND a burdensome student loan payment every month. In fact, 41% of college grads with student loan debt hesitate to purchase a home because of the sizeable amount of student loan debt they have.

 

Note: This blog was previously published in March of 2018, but has been updated to be current for our readers.

 

Purchasing your first home is a massive decision, and you’re wise to not take it lightly. But it doesn’t hurt to dream, right?

 

Picture yourself parking in the driveway of your first dream home. As you slowly walk up to the front door, everything has this wonderful soft glow and your peripherals are a bit cloudy because, well it’s a dream and that’s what they do in the movies. Anyways, you reach out for the door handle and are pleasantly surprised to find it has the perfect form, as if it were fitted for your hand alone.

 

You squeeze the latch, crack the door open and take the first step inside. It’s perfect. Everything is just as you imagined. You take another step towards the living room and brush against something with your foot. You look down to find a pile of old mail. “That’s strange,” you think to yourself. “This home doesn’t have any previous owners. This is MY dream home.” Perplexed, you shuffle through the stack and are horrified to find they’re all bills…. And they’re all addressed to you.

 

An eerie feeling crawls up your spine about the same time you hear a chilling voice say, “Stuuuudent Loooaaans.” The front door slams behind you, presumably by the Ghost of Student Loan Future. To your dismay, the living room begins to shrink and warp into a strangely familiar studio apartment. It’s at this moment you realize your dream has just become a nightmare and you have descended to the basement of Homeowner’s Purgatory, known as, “Oh Yeah, I Have Enough Student Loan Debt to Buy a Mid-Sized House. Maybe One Day I’ll Be Able to Afford It. Maybe.”

 

Fortunately, this is only a dream, and a fake one at that. More relieving, perhaps, is that this blog was not written to encourage or discourage you from purchasing a home; chances are you’ve already made up your mind on that. Besides, there are plenty of other blogs out there that can take you down that rabbit hole. What we’d like to do is help you understand how your student loan debt can and will affect your eligibility for homeownership, as well as ways to improve your chances of approval by offering ways for you to possibly pay off your debt faster and reduce the amount you’ll pay in total, such as refinancing your student loans.

 

Graduated Savings Plan

First and foremost, paying off student loan debt and purchasing a home are not linear. With a graduated savings plan, you can pay down your debt and save for a home at the same time. Start out by putting the majority of your discretionary income towards your debt and set aside 10% for down-payment savings. Next year, decrease your student loan payments to 75% and increase your savings to 25%. The following year, aim for a 50/50 split and continue the trend until you’ve paid off your student loan debt and can finally allocate 100% of your discretionary income towards your down payment.

 

Lower Your Monthly Payment

Before approving your mortgage, lenders are going to be looking closely at how much other debt you owe. Your student loan debt will likely be the heaviest hitter on that roster. They will also take into account car loans, financed furniture, etc. Your best chance for approval is to aim for a debt-to-income ratio of about 25%. Technically the cut-off is at 43%, but you’ll likely borrow at a much higher interest rate and require you to have mortgage insurance. That’s going to really ramp up your monthly payments. While your overall debt-to-income ratio will certainly play a role in your eligibility, it may surprise you to learn that mortgage lenders are not so much concerned with the overall balance as they are with your monthly payments going towards the debt.

 

One of the best things you can do to get your financial house in order is to lower your monthly student loan payments by refinancing their student loans. While this will not remove the reality of student loan debt, consolidating your multiple student loans into one loan will eliminate the hassle of keeping track on your slew of different rates and terms. You can lower your monthly payment even more by extending the repayment term of your loan by few years, though this will affect the total amount of interest you end up.

 

Lock-In Your Rates

Over the past several years, variable interest rate loans have hovered around historical lows. However, you may have noticed that the prime rate has been on the rise, and this will surely affect anyone with variable rate loans. When you consolidate loans, you have the opportunity to lock-in a fixed interest rate for all of your student loan debt, eliminating any variable rates that could prove problematic when the economy improves and interest rates follow suit. Locked-in rates mean locked-in payment, and it’s comforting to know exactly how much you’ll owe every month for the rest of your loan term (the bank will like it too). If you are even thinking about refinancing as a way to get one step closer to purchasing your first home, now is the time to take advantage of your good credit score and get the lowest rates you can qualify for in the event they continue to rise.

 

Opening Doors to a New Life

In the end, purchasing your first home while simultaneously paying down student loan debt is more than simply crunching the numbers. Keep in mind that homeownership is far more than a mortgage payment. It’s also furniture and renovations, not to mention general upkeep, which tends to average more than one percent of the total cost of the home per year. You need to weigh very real costs against your invaluable personal happiness – both present and future. As no one can help you with this formula, it’s best to follow your gut.

 

Remember, your student loan debt and your first home purchase are both investments. Get creative with this abstract equation by having a roommate or utilizing online vacation rental websites, as either option may cover the majority of your mortgage. If you buy in the right neighborhood, you might even earn a couple hundred bucks, which, being the smart and financially responsible adult you are, will go directly towards paying down your student loan debt. It’s a great way to have your cake and eat it too until the day comes when you can reach out and cut a little slice of heaven out of that pie in the sky.

 

All that being said, take a serious look at refinancing student debt. If you are able to get in on a home purchase more quickly by reducing student loan payments now, you may also enjoy a lower rate on your mortgage loan. ‘A dollar saved is a dollar earned’, especially when it comes to student loan debt. Find out home much you can save with ELFI.*

 


 

*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.

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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.
Group of friends taking photos of food for social media
2020-05-12
Is Social Media Ruining Your Finances?

Due to the coronavirus pandemic and shelter-in-place restrictions, people are spending more time on social media than ever.    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.   While social media can be a fun way to pass the time, it can have a negative impact on your finances. According to Schwab’s 2019 Modern Wealth Index Survey, more than a third of Americans said their spending habits were influenced by images and experiences shared on social media. Regularly using social media could cause you to overspend and put your financial goals at risk.    If your social media use is damaging your finances, here’s how to take back control.   

Signs your finances are getting derailed by social media 

Using Snapchat, Instagram, or TikTok isn’t necessarily a bad thing. It’s all about moderation. But there are some tell-tale signs that your social media use is hurting your bank account:   

1. Falling for FOMO

Seeing friends and old classmates’ vacation photos can give you a severe case of FOMO— fear of missing out. Those glamorous photos can cause you to want to book your own expensive trip.    However, you should know that few people can really afford those exotic vacations. According to BankRate, the average person spends less than $2,000 per year on vacations. The Federal Reserve reported that 40% of Americans can’t cover a $400 emergency expense, so a pricey vacation — or even a weekend trip to the beach — is out of reach for many.    While some people may save for months or years to pay for their vacations, many more turn to credit cards to finance their trips. Chasing their lifestyles could damage your bank account.   

2. Believing in the fantasy

With so many people posting beautiful photos of lavish purchases, it’s easy to believe that everyone is living a more luxurious life than you. But what you see on social media isn’t always real life.    You have no idea how people are paying for those luxuries. They could be well off, or they could be in extraordinary debt.    One well-known influencer racked up $10,000 in credit card debt to keep up her Instagram persona, filling her feed with pictures of dinners out, new outfits, and online purchases. And companies exist that allow users to hold fake private jet photo shoots   Take the photos you see with a grain of salt and don’t compare yourself to others.  

3. Purchasing on impulse

Social media ads are incredibly targeted; they’re based on your search history and likes, so you’ll likely see ads for products that will appeal to you. In fact, a 2019 survey from VidMob found that one-third of Instagram bought an item directly from an Instagram ad.     With one-click purchases and saved credit card information, it’s easy to make a purchase in an instant before you can really think it through.    If you find yourself making purchases while scrolling through your social media feeds, you may be wasting money.   

How to stay on track

If your social media use is compromising your finances, use these five tips to get back on track:   

1. Limit your screen time

While it may seem difficult during shelter-in-place orders, set limits on how much time you spend on social media. You can use your phone’s screen time settings to see how much time you currently spend on your phone. Use apps like Moment, Freedom, and SelfControl to limit your social media access.   

2. Keep visual representations of your goals in front of you

To combat visuals of vacations and other purchases, keep visuals of your goals handy. For example, if you’re paying down student loan debt, keep a visual graph of your progress on your phone or saved to your computer desktop.    (Hint: Need help paying down your debt? Consider student loan refinancing. Our customers have reported that they are saving an average of $272 every month and should see an average of $13,940 in total savings after refinancing their student loans with Education Loan Finance. You can get a rate quote without affecting your credit score.*)   If you plan on buying a home or a car, keep a picture of your dream purchase saved. You can also create a Pinterest vision board of what your goals are to help keep you focused.    After all, taking control of your finances can help you live lavishly once your debt is repaid.   

3. Set a waiting period before making any purchases

Institute a waiting period before making any purchases to curb impulse buys. Make yourself wait 72 hours before making a purchase.    If you see an item you want, save it. If you still want the product three days later, you can give yourself permission to buy it.    You may find that you completely forget about it, or that it’s less appealing after a few days. By making yourself wait, you can ensure that your purchases are things you really want and need.   

4. Curate your feeds

Social media can be fun, but it can also make you feel bad about yourself and your life. To combat those problems, spend some time eliminating feeds and unfollowing accounts that make you feel inadequate, and only follow accounts that make you happy.    Feeds that feature cute dogs? Follow! Home decor feeds with throw blankets and lamps that cost more than your rent? Unfollow.   

5. Practice gratitude

Researchers have found that focusing on things that you are thankful for is proven to make you happier. Every day or at least once a week, set aside some time to jot down things you are grateful for that happened during the week.    They don’t have to be big things. Cooking an especially tasty dinner, being able to spend time binging Netflix with a friend or partner, walking your dog, or still having a paycheck during a difficult economic period are all things to be thankful for right now.    By focusing on the good things that are already in your life, you’re less likely to be affected by FOMO and social media’s influence.   

Managing your money

Using social media can be a great way to connect with friends and family and pass the time, but it can negatively impact your finances. But by using these tips, you can combat its effects and manage your money.   
  *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.