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.
Learn More
×
TAGS
Private Student Loans
Student Loan Refinancing
Student Loans

Refinancing vs. Student Loan Grace Period

May 14, 2018

April showers bring May flowers, but what do May flowers bring? Millions of college grads who will enter the workforce with an average of $37K worth of student loan debt. Fortunately, the government has your back (at least for six months, anyway) in the form of the student loan grace period. But before you lower your poolside lounge chair down a couple notches and nap through the sunny afternoon, take note of the late summer storm brewing on the horizon.

It’s grace, you just have to pay for it

It’s true that you are NOT required to make repayments on your federal loans for six months. What you may not know is that, in most cases, interest still accrues during this grace period. Furthermore, you may not be aware of how much you could save by taking advantage of early repayment rather than the grace period.

An article on studentloanhero.com puts it this way:

“Let’s say you have $30,000 in student loans at 6% interest. Make just one extra payment of $500 dollars this summer and you could cut $1,120 in interest from the lifetime cost of your loan. If you really want to get serious about putting extra payments towards your student loans, contribute $1,500 before payments become due and reduce the time it takes to pay off your debt by two years – plus earn $3,188.29 in interest savings.”

If you consider how much interest is going out the window, it’s important to remember you are, in a sense, paying for that six-month buffer. By putting in a couple weeks’ worth of work, you can stretch your hard-earned summer dollars quite a long way and reel in the length of time you’ll have to stare at your student loan debt out of the corner of your eye.

Steps to repaying your student loan debt

Regardless of whether or not you choose to take ‘advantage’ of the grace period, you will eventually have to start making payments. An excellent article on cnbc.com outlines the steps you might consider in order to avoid common mistakes many recent grads make.

1)    Know your loans

2)    Update your contact info

3)    Monitor your cash flow

4)    Register for autopay

5)    See if your employer will chip in

6)    Consider consolidating or refinancing

We encourage you to read the article and explore the options therein, but we implore you to seriously consider Step #6 by refinancing your student loans (maybe even bump it up to, let’s say – Step #1 or #2 because it actually encompasses the others). It’s free and will help you in virtually every sense – a low, fixed interest rate with a single monthly payment and a repayment term that best fits your budget. The only way refinancing could be considered a disservice is if you’re planning to hang your hat on one of the federal loan forgiveness or repayment programs, as refinancing will automatically forgo many of those options. Though, if you do your research on those programs, avoiding them might be the most graceful step you can take.

Borrow Smart, Save Smarter

Refinancing with a reputable lender like Education Loan Finance can save borrowers an average of $280* per month and more than $26K over the life of their loans. The smartest move you can make after school would be to lock yourself into historically low-interest rates while simultaneously paying down your loan balance over the summer. Besides, you can still relax by the pool (on the weekends, of course), only instead of avoiding the impending storm of student loan debt, you can daydream of being free from the burden of student loans years before the rest of your graduating class.

 

 

* Member Lifetime Savings – Average member lifetime saving calculation of $26,215.92 total savings is based on information provided by Education Loan Finance customers who refinanced their student loans between 08/16/2016 and 10/07/2017. While these amounts represent average amounts saved, actual amounts saved will vary depending upon a number of factors.

Leave a Reply

Your email address will not be published. Required fields are marked *
2020-03-25
Current LIBOR Rate Update: March 2020

This blog provides the most current LIBOR rate data as of March 17, 2020, along with a brief overview of the meaning of LIBOR and how it applies to variable-rate student loans. For more information on how LIBOR affects variable rate loans, read our blog, LIBOR: What It Means for Student Loans.

 

What is LIBOR?

The London Interbank Offered Rate (LIBOR) is a money market interest rate that is considered to be the standard in the interbank Eurodollar market. In short, it is the rate at which international banks are willing to offer Eurodollar deposits to one another. Many variable rate loans and lines of credit, such as mortgages, credit cards, and student loans, base their interest rates on the LIBOR rate.

 

How LIBOR Affects Variable Rate Student Loans

If you have variable-rate student loans, changes to the LIBOR impact the interest rate you’ll pay on the loan throughout your repayment. Private student loans, including refinanced student loans, have interest rates that are tied to an index, such as LIBOR. But that’s not the rate you’ll pay. The lender also adds a margin that is based on your credit – the better your credit, the lower the margin. By adding the LIBOR rate to the margin along with any other fees or charges that may be included, you can determine your annual percentage rate (APR), which is the full cost a lender charges you per year for funds expressed as a percentage. Your APR is the actual amount you pay.

 

LIBOR Maturities

There are seven different maturities for LIBOR, including overnight, one week, one month, two months, three months, six months, and twelve months. The most commonly quoted rate is the three-month U.S. dollar rate. Some student loan companies, including ELFI, adjust their interest rates every quarter based on the three-month LIBOR rate.

 

Current 1 Month LIBOR Rate - January 2020

As of Monday, March 17, 2020, the 1 month LIBOR rate is 0.75%. If the lender sets their margin at 3%, your new rate would be 3.75% (0.75% + 3.00%=3.75%). The chart below displays fluctuations in the 1 month LIBOR rate over the past year.

 

(Source: macrotrends.net)

   

Current 3 Month LIBOR Rate - January 2020

As of Monday, March 17, 2020, the 3 month LIBOR rate is 1.05%%. If the lender sets their margin at 3%, your new rate would be 4.05% (1.05% + 3.00%=4.05%). The chart below displays fluctuations in the 3 month LIBOR rate over the past year.

  (Source: macrotrends.net)  

Current 6 Month LIBOR Rate - January 2020

As of Monday, March 17, 2020, the 6 month LIBOR rate is 0.91%%. If the lender sets their margin at 3%, your new rate would be 3.91% (0.91% + 3.00%=3.91%). The chart below displays fluctuations in the 6 month LIBOR rate over the past year.

  (Source: macrotrends.net)  

Current 1 Year LIBOR Rate - January 2020

As of Monday, March 17, 2020, the 1 year LIBOR rate is 0.86%. If the lender sets their margin at 3%, your new rate would be 3.86% (0.86% + 3.00%=3.86%). The chart below displays fluctuations in the 1 year LIBOR rate over the past year.

  (Source: macrotrends.net)  

Understanding LIBOR

If you are planning to refinance your student loans or take out a personal loan or line of credit, understanding how the LIBOR rate works can help you choose between a fixed or variable-rate loan. Keep in mind that ELFI has some of the lowest student loan refinancing rates available, and you can prequalify in minutes without affecting your credit score.* Keep up with the ELFI blog for monthly updates on the current 1 month, 3 month, 6 month, and 1 year LIBOR rate data.

 
 

*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.

READ MORE
2020-03-20
A Lawyer’s Guide to Student Loan Refinancing
When Matt Sembach, an assistant public defender, graduated from law school, he had a mix of both private and federal student loans — some with interest rates as high as 10.75%.    

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.

  “In terms of law school, I took out an estimated $135,000,” he said. “When I graduated from law school, I owed about $147,000. The $147,000.00 figure is higher than the amount that I actually took out because my big loan was unsubsidized and the interest was accruing while I was still in law school.”   Sembach’s situation isn’t unusual. According to the AccessLex Institute, the vast majority of law school graduates borrow money to pay for school. On average, they leave school with $142,870 in student loan debt.    While attorneys take on a significant amount of debt, their earning potential is immense. The National Association for Law Placement reported that the overall median first-year salary in private practice was $155,000 in 2019, a $20,000 increase from 2017.    With large balances but six-figure incomes, lawyers are good candidates for student loan refinancing, especially if you have high-interest student loans.   

When refinancing law school debt makes sense

When you refinance your law school debt, you take out a loan from a lender like Education Loan Finance for the amount of your current debt. The new loan has different terms, including interest rate and length of repayment.    While refinancing isn’t for everyone, it’s a good idea in the following scenarios:   

1. You have high-interest student loans

As Sembach found out, graduate, professional, and bar exam loans can have extremely high interest rates. Over time, those high rates can cause your loan balance to balloon, adding thousands to your loan cost.    When you refinance your debt, you can qualify for a lower interest rate and save money over the life of your loan.   

2. You want to pay off your loans early

If you refinance your loans and qualify for a lower interest rate, more of your monthly payment will go toward the principal rather than interest charges. If you keep making the same payment that you had before you refinanced, you can pay off your loan months or even years early.   

3. You want to simplify your payments

If you’re like most graduates, you had to take out a number of different loans to pay for school.    “When I graduated law school, I had 10 to 15 different loans that I needed to consolidate,” said Sembach.    Unfortunately, that’s very common. Graduates often have several loans to manage, with multiple payment due dates and loan servicers to remember.    By refinancing your debt, you consolidate your loan together. After that, you have just one loan and one payment to handle.   

4. You want to reduce your monthly payments

If your payments are currently too expensive, refinancing may provide you with some relief. When you refinance your debt, you can extend your repayment term. For example, if you are currently on a 10-year repayment plan, you could opt for a 20-year repayment plan. You’ll pay more in interest charges with a longer term, but your monthly payments will be much more affordable.   

5. You aren’t eligible for loan forgiveness

While student loan refinancing can be an effective tool for managing your debt, one of its biggest drawbacks is that you lose out on federal benefits when you refinance federal student loans. If you’re a public defender or work for a legal aid organization, you could be eligible for loan forgiveness through Public Service Loan Forgiveness (PSLF). But if you refinance your loans, you’ll lose your eligibility.    However, lawyers who work in private practice or who have loans from private student loan lenders don’t qualify for PSLF. In that case, refinancing can make good financial sense.   

How to refinance your loans

Refinancing law school debt is surprisingly easy. Just follow these three simple steps:   

1. Check the eligibility requirements

Before refinancing, make sure you meet the lender’s eligibility requirements and collect the necessary documentation to speed up the process. With ELFI, you must meet the following criteria: 
  • You must be a U.S. citizen or permanent resident
  • You must have at least $15,000 in student loans
  • You must have a bachelor’s degree or higher
  • You must have a credit score of 680 or higher
  • You must have an income of $35,000 or higher
  • Your credit history must be at least 36 months old
  • Your degree must be granted by an approved post-secondary institution
If you don’t meet the criteria on your own, you may still be able to get a loan by adding a co-signer to your application. A co-signer is usually a parent, relative, or friend who applies for a loan with you and is responsible for making the payments if you fall behind. Adding a co-signer increases your chances of qualifying for a loan and securing a lower interest rate.   

2. Get a rate quote 

Before submitting your application, get a rate quote. With ELFI’s Find My Rate tool, you can get an interest rate estimate and view loan terms without affecting your credit score.* Once you find a loan that works for you, you can proceed with the application process.   

3. Submit your application

To complete the application, you should be prepared to enter personal information about yourself, including your name, address, Social Security number, employer information, and income.    You’ll also need to submit documentation, including: 
  • A copy of a government-issued ID, such as a driver’s license
  • Proof of income, like a W-2 or recent tax return
  • Bank account information if you’re signing up for automatic payments
  • Current billing statement or payoff letter for each current student loan
 

Alternatives to student loan refinancing

Refinancing can help you save money and pay off your debt early, but it’s not a great solution for all attorneys. If you don’t think that student loan refinancing is right for you, there are other ways to manage your debt more effectively.   

1. Apply for PSLF

One option is to pursue loan forgiveness through PSLF. For many borrowers, like Sembach, PSLF can be a powerful debt relief tool. Previously, Sembach worked in private practice. But he switched career tracks to take advantage of PSLF.    “I pursued PSLF to help get rid of the debt,” he said. “I took a $10,000 pay cut when I left private practice to become a public defender, but I took the pay cut because of PSLF.”   To qualify for PSLF, you must have federal student loans and work for a qualifying non-profit organization or government agency for at least 10 years. During that time, you must make 120 qualifying monthly payments. If you meet those requirements, your remaining loan balance will be forgiven tax-free.   

2. Apply for an income-driven repayment plan

If you can’t afford your monthly payments and you have federal student loans, you may be able to reduce your payments by applying for an income-driven repayment (IDR) plan. Under an IDR plan, your loan servicer extends your repayment term and sets your monthly payment at a percentage of your discretionary income.    You can apply for an IDR plan online or by contacting your loan servicer over the phone.   

3. See if you qualify for repayment assistance

Some states try to attract talented attorneys by offering student loan repayment assistance programs. They will repay some or all of your student loans in exchange for a service commitment.    For example, attorneys in Vermont who work for certain civil legal aid organizations can qualify for up to $5,000 per year in student loan repayment assistance from the Vermont Bar Foundation.   The American Bar Foundation hosts a database of student loan repayment assistance programs available all over the nation. You can search the database to find programs you may be eligible for near you.    

Repaying your student loans

As a lawyer, you likely have a significant amount of student loans. While your loan balance can be a burden, student loan refinancing can help you save money and lower your monthly payments.     To find out how much you can save by refinancing law school debt, 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.
READ MORE
2020-03-18
How to Plan a Wedding While Paying Student Loans
By Caroline Farhat   Congratulations, you’re engaged! Planning a wedding is an exciting time! From choosing your attire to picking out a venue and decor, there are a lot of decisions to make and many that can be costly. If you’re starting to plan your big day, you might be wondering how you’ll pay all of these extra expenses while still paying your student loan debt and regular bills. Don’t worry, we’ve got your back! Read on for some tips on how to plan a wedding with student loans on your radar.    

1. Set Realistic Expectations

A majority of the costs for a wedding are based on the number of guests, so you can save money by keeping your guest list relatively small. For example, if you plan a wedding for 350 people you will most likely need a bigger venue than you would for 100 guests. Venue costs typically account for one-third of ceremony and reception costs so this can be a major budget buster. Food and beverage and wedding favors are also typically charged per person. Because weddings can be expensive and extravagant or budget-friendly and low-key, it’s critical to discuss your desires and budget with your partner before you start planning.  

Here are some good points to discuss:

  • Parameters for the guest list: Do you want to invite your college roommate you haven’t seen in three years and every cousin on your partner’s side? Or are you looking for a more intimate affair with just your closest family and friends? 
  • Your near-term financial goals (besides the wedding): Are you saving for a down payment for a home? Considering starting a family? Understanding your joint financial goals is a great way to guide your expectations. 
  • Location of the wedding: Agreement on location is key because it will drive all of your other planning. If you’re eyeing a destination wedding and your partner wants a backyard wedding, you will want to understand each other’s individual desires so that you can create a joint wedding that makes both of you happy!
 

2. Set a Budget and Stick to It

Before you plan a budget, it helps to know who will be contributing to the wedding costs. Will you be paying for wedding expenses equally with your partner? Do any family members want to help with costs? This information can help shape your budget.     The average cost of a wedding in 2019 was $28,000 according to The Knot 2019 Real Weddings Survey. This figure only accounts for the ceremony and reception and can vary widely depending on your location. When you add in the average costs of an engagement ring ($5,900), a honeymoon ($5,000), and other wedding events such as the rehearsal dinner, bachelor/bachelorette parties, and engagement parties, the actual wedding costs can be much higher. If these numbers are making you want to elope in Vegas, don’t panic. There are some ways you can try to lower the cost of a wedding: 
  • Going DIY - DIYing at least some elements of the wedding can save you a good chunk of money. If you’re a Pinterest aficionado, try creating your own wedding invitations or centerpieces. Better yet, homemade wedding favors would be extra special for your guests and can save you hundreds of dollars.
  • Barter - Do you have friends that are photographers, florists, musicians, or bartenders? Bartering can help keep your expenses down while still getting the services you need. 
  • Timing - Are you dead set on having a June wedding or are you more flexible? In some areas, the month you pick can have a big impact on cost! Typically, June is a higher cost since it’s considered peak season, while winter weddings tend to be less expensive. Additionally, having your wedding on a Friday or Sunday can save you some money compared to a Saturday wedding. 
  Tip: It’s important to keep in mind that most wedding vendors do not require full payment upfront. Many vendors require a downpayment to secure their services and final payment closer to the wedding date. Open a separate bank account or flag any money you set aside for final wedding payments so that it doesn’t get used for other expenses that might pop up.   

3. Cut Expenses

In the midst of all the wedding costs, it may seem like any money you had leftover at the end of the month is now going towards the wedding. If money gets tight, think of ways to cut expenses: 
  • Refinance your student loans: Refinancing can be a great way to get extra cash now and set you and your partner up for a better financial future. Refinancing can save you on your monthly payment, as well as save you on interest costs over the life of the loan. For example, if you have a $35,000 loan with an 8% interest rate and get approved for an interest rate as low as 3.99% you could be saving up to $70 per month and over $8,000 in interest costs. Check out our student loan refinance calculator to see how much you could be saving.*   
  • Cut cable or cell phone bill: If you still have cable, it’s easier now than ever to cut the cord and still watch the shows and sports you want to see. Still paying a high cell phone bill? Compare carriers and call your existing provider to see if you can lower your bill.  
  • Reduce eating out or other entertainment expenses: It may not seem easy or fun to stop eating out or to cut back on entertainment, but reducing these expenses now could be just what you need to afford the band or DJ you really want at your wedding. 
 

4. Start a Side Hustle

A side hustle is a way you can earn money outside of your day job. The possibilities for a side hustle are endless: You could babysit, walk dogs, pick up a part-time job, etc. The extra money can help pay for your wedding expenses or you could put it towards your future financial goals. Earning extra money is not only helpful during wedding planning when you will experience extra expenses, but it can also help you after the wedding to make additional payments on your student loans, save for a new car or fund a dream trip.   

Bottom Line

Planning a wedding with student loans can be a stressful time. Don’t let your student loans be a part of the stress. With realistic expectations and a budget, you can manage to have the wedding of your dreams while still paying down your student loan debt!   
  *Subject to credit approval. Terms and conditions apply.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
READ MORE