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Should You Refinance Parent PLUS Loans?

October 25, 2019

Parents spend their days and (sleepless) nights trying to create the best life for their children. We bake cookies for bake sales, we spoil them on their birthdays, we shuttle around town to dance classes and lacrosse games, and we even take out loans for them—big loans—to help them pay for college. So what happens when your baby is all grown up and graduated from college? You cry. You celebrate. Then you get to refinance your Parent PLUS Loan so you can put a little money back in the “Me” column of your budget.

 

Back up. What’s a Parent PLUS Loan?

Skip ahead if you’re already the proud owner of one of these loans.

 

A Parent PLUS Loan is a federal education loan taken out by parents to help pay for their child’s college tuition. The U.S. Department of Education actually offers Direct PLUS Loans to parents or graduate and professional students—the loan is simply called a Parent PLUS Loan when it’s made to a parent.

 

These loans are available to moms and dads of dependent undergraduate students and offer one way to pay for your dependent child’s college education. Parent PLUS Loans differ from other college loans because the parent assumes complete financial responsibility (i.e., if payments aren’t made on time, it affects the credit score of mom and/or dad). While some parents may be eager to help foot the bill for their child’s education, you should always explore private student loans, since Parent PLUS Loans come with origination fees while private student loans typically do not. You should also compare the interest rates on the Parent PLUS loans to rates offered by private student loan companies such as ELFI.1 When evaluating the costs of Parent PLUS loans vs private student loans, you should compare the annualized percentage rate, or APR, which includes both interest and origination fees. In addition, private lenders offer the ability to have your child/dependent be a co-signer on the loan whereas the Parent PLUS loan does not.

 

Options for Refinancing Parent PLUS Loans

Even though your child/dependent may not have graduated from college yet, you can lower your debt burden by taking advantage of refinancing your Parent PLUS loans (and private student loans) and potentially saving money by either lowering your interest rates and/or extending the term of your payment. The good news about refinancing Parent PLUS loans is that you can refinance the loans more than once, assuming you qualify. So you can refinance your Parent PLUS Loans at any time with a private lender even before your dependents/children graduate! If you have multiple Parent PLUS loans, you can combine them all, if economic, when your dependents/children graduate as well!

 

Even though Parent PLUS Loans are originated through the U.S. Department of Education, you can refinance them through a private lender. Refinancing your Parent PLUS Loans with ELFI1 could mean:

  • Lower Interest Rates
  • Different Interest Types (Variable1 vs Fixed)
  • One, Simple Payment
  • Choose a New Repayment Term Length

 

If you’re a parent who financially supported your child’s education through a Parent PLUS Loan, see if you qualify to refinance that Parent PLUS Loan or simply learn more about our Parent Loan Refinancing options. Refinancing could establish flexible repayment plans and competitive interest rates that could lower your monthly payments or total cost of the loan. ELFI Customers reported saving an average of $309 every month and an average of $20,936 in total savings after refinancing student loans with Education Loan Finance.2

 

If you’re considering refinancing your Parent PLUS loans and/or your private student loans, consider a refinanced Parent Loan from ELFI.1 ELFI provides parent loans with flexible payment terms of 5, 7, and 10 years and no penalties for paying them off early.1 You can refinance both your Parent PLUS loans and your private loans into a single private loan. Rest easy knowing you’ve secured a low-interest rate and chosen a repayment plan that’s tailored to fit your lifestyle.

 


1Subject to credit approval. Terms and conditions apply. The interest rate and monthly payment for variable rate loans may increase after closing. Your interest rate will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.10 per $1,000 borrowed. To qualify for refinancing or student loan consolidation through Education Loan Finance, you must have at least $15,000 in qualified parent loan debt and the student must have earned a bachelor’s degree or higher from an approved post-secondary Education Loan Finance institution. Education Loan Finance Parent Loans are limited to a maximum of the 10-year term.

 

2Average 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 several factors.

 

Note: Links to other websites are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site. SouthEast Bank does not control the content of these sites.

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photo representing financial aid options for middle income families
2020-02-10
Financial Aid Options for Middle-Income Families

It’s no secret that college comes with a hefty price tag. Every year, students and their families have to figure out how they’re going to pay thousands of dollars in school bills. While high-income families may have the resources to pay tuition, footing the entire bill just isn’t realistic for some families, especially if they have more than one child attending college. This is why many students rely on financial aid to fund their education.

 

It’s generally known that students from lower-income families can qualify for special scholarships and grants that help fill the gap to fund their education, but for families around the middle-income tier, financial aid options may be harder to come by and make them feel that their options are limited. Rest assured that there are options for middle-class families to receive the financial assistance they need – it just may take a bit more effort.

 

FAFSA

When it comes to looking for financial aid for college, the FAFSA is a great place to start. The Free Application for Federal Student Aid has no income cutoff for eligibility, so your child could still receive some need-based aid from the FAFSA, especially if he or she plans on enrolling at a higher-cost school. The FAFSA opens October 1 every year, and you can apply as early as the year prior to your child’s first day of college. The earlier you apply, the more likely your child is to receive financial aid. 

 

Scholarships

Researching and applying for scholarships has continually proven itself worthy of the effort. Many scholarships are merit-based instead of need-based, so your child may be eligible for many different scholarships depending on the qualifications. Start by looking for local scholarships – many locally-owned businesses and organizations offer scholarships for graduating high school students. If your child visits the school guidance office, they may have some applications on file. You or your spouse could also ask your employer if they offer any type of 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 a good place to start. Finally, many colleges offer merit-based scholarships and endowment scholarships. Make sure your child looks for institutional scholarships at the school he or she plans to attend. You may discover that if your child joins a club or raises a standardized test score by a couple of points, he or she could receive thousands more dollars of financial aid.

 

Tuition Discounts

If a family member, such as a parent or grandparent attended the same college or university you're enrolled in, you may receive a tuition discount. There may be additional requirements to qualifying for this discount, such as, your family member being active in the school's alumni association or maintaining a certain GPA.

 

Tax Rewards

Middle-income families are perfectly positioned to receive tax credits for college expenditures. For example, the Lifetime Learning credit has income requirements that exclude those who earn over and under certain amounts. 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 financial aid options and find you still have more 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 for you. 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 options,* click here.

 

The cost of college can present a challenge for families at all income levels, but middle-income families often struggle the most to find good financial aid options because their finances fall between affording college and needing assistance. If your family is in this situation, don’t let it get you down. The options in this article are a good place to start searching for financial assistance. Don’t lose sight of the end goal – getting the degree you want and establishing a successful career. If you’re already looking for financial aid options, you’re well on your way.

 
  *Subject to credit approval. Terms and conditions apply.  

Note: Links to other websites are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site. SouthEast Bank does not control the content of these sites.

parent and child looking at status of student loans
2020-02-05
7 Tips for Parents Paying A Child’s Student Loans

By Tracey Suhr   $233,610. This is the amount of money today’s average American family can expect to spend raising one child. If this seems like a lot, get ready for more sticker shock since this doesn’t include the cost of college. The average tuition at a public in-state school for the 2019-2020 school year is $10,116. Multiply that by four years (plus student loan interest), and you’re adding another $50,000+ to the total cost of raising a child.    If you’re reading this blog, you’re likely well aware of the cost of college, and you might now be looking for ways to help your son or daughter pay their college debt. Your recent graduate likely has a student loan (and if they’re lucky, parents who offered to make payments toward that loan). Or you might have taken out a parent loan* to fully cover the cost of college for your child. Either way, those loans are staring you in the face, begging to be paid.   Luckily, there are no rules against helping your son or daughter pay off student loan debt. Here are some tips for parents who are paying a child's student loans.  

Set Up Automatic Payments

The easiest way to help manage your child’s student loan debt is by setting up automatic payments from your checking or savings account. We all get busy and forget items on our to-do list. And while one or two missed payments might not make a difference, several can result in late fee charges and dings on your credit, especially if the loan is in your name or if you were a co-signer for the loan.   

Play By the Rules (Tax Rules)

If you help pay your child’s student loan debt, you might need to pay gift tax and file a gift tax return during tax season. A gift tax applies to the giver (that’s you) and to any contributions more than $15,000, as of 2020. Tuition is excluded from gift tax but, unfortunately,  loan payments are not. Double-check current IRS regulations around loan payments before making the decision to help pay your child’s student loan debt. Here is a current FAQ list around gift tax.  

Focus on Loans with High-Interest Rates

Look at all your loans—car loans, mortgage loans, credit card debt—and focus on those with the highest interest rate. If you have a credit card with an 18% interest rate, and the interest on your child’s student loan is just 8%, it would be wiser to focus on paying your card first. Even adding an extra $50 or $100 per paycheck to those higher rate loans can help in the long run.  

Prepay the Loan

If you receive a bonus or a cushy tax return, allocate those extra funds toward the student loan debt. By paying down your child’s student loan faster, you can reduce the total amount of interest paid over the life of the loan by paying less monthly interest.    You can also allocate extra funds toward paying your child’s student loans by rearranging other existing finances. For example, if you have multiple credit cards, consolidate the balances into one loan. A single loan with a fixed interest rate that’s lower than the APR on your credit card will help you simplify and save.   

Refinance Student Loans

Refinancing student loans is another way to simplify payments and readjust finances. Whether the loan is a parent loan or student loan, reducing the interest rate lowers monthly and total loan payments. You can also change the term of the loan to 5, 7, or 10 years to help lower monthly payments, allowing you to reallocate funds to other expenses or debts (refer back to our tip about paying off debts with high-interest rates first).   Related >> Should You Refinance Parent PLUS Loans?   ELFI offers student loan refinancing options for both parents and students, with some of the lowest student loan refinancing rates available and flexible terms. We also have no application fees, no loan origination fees, and no penalty of paying off your student loan early. See how much you could save with ELFI Student Loan Refinancing*.  

Set Up Biweekly vs. Monthly Payments

You might have noticed that some months, you get an extra paycheck. This is because the 52 weeks in a year don’t evenly divide into four weeks for every 12 months. You can take advantage of these extra four weeks by setting up biweekly loan payments. If your monthly payment is $300, and you readjust to paying $150 every other week, you pay the same amount each paycheck, but end up with an extra loan payment paid over the course of a year. This pays your student loan debt faster. Another bonus? This tip works for paying off any loans, not just student loans.   

Fully Understand Your Offer

Paying your child’s student loans, whether partially or in full, is a generous offer. It can help your new graduate get on his or her feet in the working world. It can also help free up money for dealing with other debts or life’s unexpected surprises. Since your offer also impacts your financial situation, be sure you fully understand the pros and cons. Consider how close you are to retirement, and if your 401k or other funds will suffer. Be aware of the balances and interest rates in your other debts.    Whether or not you chose to help your child pay their loan, student loan refinancing (or even refinancing your parent loan) can help avoid the hassle of multiple payments and get a more affordable rate and flexible terms. See if you qualify for student loan refinancing*.   
  *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.
woman helping child refinance student loans
2020-01-28
Helping Your Child Refinance Their Student Loans

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.

 

As a parent, it can be frustrating to watch your child pay so much toward their student loans each month rather than use their money to buy a home or invest for their futures. One strategy your children can use to accelerate their debt repayment and reach their goals faster is student loan refinancing. With this approach, they can get a lower interest rate and save money over the length of their loan.

 

If they don’t know where to start or how to go about refinancing student loans, there are several ways parents can help.

 

1. Research different lenders

There are dozens of student loan refinancing companies out there, but they’re very different from one another. Help your child find the best lender for them by considering the following factors:

  • Fixed and variable interest rates: Not all lenders offer refinancing loans with fixed and variable interest rates. If your child wants to pay off their debt as quickly as possible, opting for a variable-rate loan can be a smart idea. Variable-rate loans tend to have lower interest rates at first than fixed-rate loans, helping them save money.
  • Competitive rates: The rate your child can qualify for can vary widely from lender to lender. Get quotes from multiple lenders to get the best rate possible. With Education Loan Finance, your child can get a rate quote without affecting their credit score*.
  • Forbearance options: Most student loan refinancing lenders don’t offer forbearance in cases of financial hardship, but there are a few that do. That perk can be a significant benefit if your child loses their job or becomes ill.
 

2. Look up their student loans

To pay for school, your child likely took out several different student loans. Over time, those loans can be transferred and sold, making it easy to lose track of them. To help your child refinance their student loan debt, help them locate their loans and identify their loan servicers.

  • For federal student loans: Have your child log in to the National Student Loan Data System (NSLDS) with their Federal Student Aid (FSA) ID. Once they’re signed in, they can see what federal loans are under their name and who is currently servicing the debt. Remember, the NSLDS contains sensitive information, so make sure your child never shares their FSA ID or other account details.
  • For private student loans: Private student loans won’t show up on the NSLDS. Instead, your child will have to review their credit report to find their loans. They can do so for free at AnnualCreditReport.com. The credit report will list all active accounts under their name, including student loans.
 

3. Create a monthly budget with your child

Even if your child earns a good salary and has excellent future earning potential, it’s a good idea for them to come up with a budget before moving forward with the student loan refinancing process. By seeing how much they have coming in and how much they spend each month, they can better come up with a plan to repay their loans.

 

You can sit down with your child and make a budget together. While you can use paper and pen, your child may find programs like Mint or You Need a Budget — which automatically sync with their financial accounts — more intuitive.

 

Make sure your child considers all of their expenses, including rent, utilities, student loan payments, and extras for entertainment. A portion of the money left over after covering their set expenses can be put toward additional student loan payments, reducing the interest that accrues over the length of the loan.

 

If your child wants to pay off their debt as quickly as possible, there are a few lifestyle changes you can suggest to help them reach their goals: 

  • Get a roommate: While it may not sound glamorous, getting a roommate can cut your child’s living expenses in half. If your child puts the money saved toward their student loan balances, they can cut months or even years off their loan term.
  • Increase income: Boosting income is key to your child’s financial success. If they’ve been working for a while and have been performing well, encourage them to ask for a raise at their next review. Or, they can work additional overtime hours or freelance on the side to earn extra money.
  • Cut back: Review your child’s bank and credit card statements with them and look for areas where your child may be able to cut back. For example, maybe they can skip dining out so often and cook more at home. Over time, the savings can be substantial.
 

4. Show them how to check their credit report

When your child applies for a refinancing loan, the lenders will review their credit report. Before your child submits an application, help them check their credit.

 

Your child can view their credit report from each of the three major credit bureaus — Experian, Equifax, and TransUnion — once a year at AnnualCreditReport.com. Review it alongside your child and look for errors, such as accounts that don’t belong to your child. If there are any issues, help your child dispute them with each credit bureau to improve their credit report.

 

5. Co-sign their student loan refinancing application

If your child recently graduated, they may have insufficient credit to qualify for a student loan refinancing by themselves. If that’s the case, you can help them manage their debt by acting as a co-signer on the loan.

 

As a co-signer, you’re applying for the loan along with your child. If your child can’t keep up with the payments, you’ll be liable for them, instead. Because you share responsibility for the loan, there’s less risk to the lender. Having a co-signer makes it more likely that a lender will approve your child for a loan, and give them a competitive interest rate.

 

Refinancing student loans

Student loan refinancing can be a smart way for your child to tackle their debt. However, recent graduates may not be aware of refinancing or how to proceed. As a parent, you can help your child tackle their debt by walking them through the refinancing process. With your help, they can refinance their education loans and become debt-free years earlier than expected.

 

Looking for more tips as a parent of a college graduate? If you took out student loans in your own name to help pay for your child’s education, parent student loan refinancing can be a smart strategy for you, too. With Education Loan Finance, you can refinance as little as $15,000 in parent loans and have up to 10 years to repay the loan.*

 
 

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.