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Student Loan Refinancing

Student Loan Refinancing vs. Consolidation

September 16, 2016
Updated September 15, 2020

If you’re looking into student loan repayment options, you’ve likely heard the terms “student loan refinancing” and “student loan consolidation.” While often used interchangeably, these are two different repayment structures that offer varying benefits. Read on to learn about each of these processes, as well as which one might be right for you. 

Consolidation means compiling several loans into one. While it may increase your interest rate, federal student loan consolidation is a viable option if you want to simplify your repayment schedule without losing federal loan benefits. This type of consolidation can also make you eligible for some federal benefits, like Income-Driven Repayment (IDR) plans.

Student loan refinancing, on the other hand, is designed to save money by lowering your interest rate. This is a great option for borrowers with significant private student loan debt because you can combine your private and federal student loans into one monthly payment at a lower interest rate. While you will lose any federal loan benefits, if your primary objective is to save money in the long run, this may be the option you’re looking for.

 

Federal Student Loan Consolidation

Federal or Direct Loan Consolidation is all about simplicity. Regardless of your income or credit history, you can combine all your federally-funded subsidized or unsubsidized student loans into one monthly payment.

The benefits of consolidating your federal student loans include:

  • Simplifying your payment schedule
  • Exchanging multiple variable interest rates for one fixed interest rate
  • Extending your student loan repayment term
  • Maintaining federal student loan benefits including deferments, grace periods, and federal student loan forbearance

Opting for a Direct Consolidation Loan may also make you eligible for some government programs or Public Service Loan Forgiveness opportunities, including:

  • REPAYE (Repay-as-You-Earn)
  • PAYE (Pay-as-You-Earn)
  • IBR (Income-Based Repayment)
  • ICR (Income-Contingent Repayment)

Consolidation means you can say ‘goodbye’ to managing several variable interest rates. It doesn’t, however, guarantee you a lower fixed rate. Your new interest rate will equal the weighted average of all your previous rates rounded up to the nearest 1/8th percent.

Direct Loan Consolidation also means you’ll have the opportunity to change your student loan repayment term. With options from 10 to 30 years, you can choose to repay your loans quickly to cut back on interest or to extend your term for lower monthly payments.

If you’re considering federal student loan consolidation, choose your timeline wisely. You can only consolidate your federal loans once unless you add additional loans later.

Many types of federal student loans can be consolidated into a Direct Consolidation loan, including Direct Subsidized Loans, Direct Unsubsidized Loans, Parent PLUS Loans and more. To qualify for federal student loans you must:

  • Leave school, graduate, or become a part-time student
  • Have the loan types listed here to qualify
  • Be in repayment or in the grace period of your loans

 

Private Student Loan Consolidation

Private student loan consolidation is synonymous with refinancing. It’s designed to reward fiscally-responsible borrowers with competitive interest rates and payment options that federal consolidation doesn’t offer.

Private student loan consolidation means letting go of federal benefits. These include Income-Driven Repayment plans, Private Student Loan Forgiveness (PSLF), deferments and forbearances. There are many factors to consider when deciding between PSLF vs Refinancing.

Although not guaranteed, reputable private lenders are invested in their clients’ success and offer support services to help keep their borrowers in good standing during unexpected financial hardship. ELFI pairs borrowers with expert Personal Student Loan advisors to provide a direct point of contact throughout the repayment process.

 

Private Student Loan Refinancing

Similar to Direct Loan Consolidation, refinancing student loans involves combining multiple student loans into one loan with one monthly payment. However, unlike Direct Loan Consolidation, this option is only offered by private lenders and allows the consolidation of both federal and private student loans should you wish to do so. 

Private student loan refinancing offers several unique benefits:

  • Lowered interest rates, with your choice of fixed or variable rates
  • The chance to extend or shorten your loan repayment term
  • A simplified payment schedule

Student loan refinancing benefits include the ability to change your repayment term. ELFI, for example, offers repayment terms of 5 to 20 years. With a longer repayment term, your monthly payments will be lower, but you’ll pay more interest over the life of the loan. A shorter repayment term means higher monthly loan payments, but fewer of them.

 

Additionally, interest rates are calculated based on the borrower’s credit history and overall financial health, as well as current financial market conditions, rather than the weighted average of the included loans. This means, with a good credit score and payment history, you’re likely to improve your interest rate.

Before considering refinancing your student loan debt you want to make sure you have a steady and favorable income, a good credit score and a good debt to income ratio. ELFI’s eligibility requirements also include:

  • Proof of U.S. citizen or permanent residence
  • Documentation proving age of majority
  • Minimum loan amount of $15,000
  • Minimum income of $35,000
  • Minimum credit score of 680
  • Minimum credit history of 36 months
  • Bachelor’s degree or higher
  • Degree from an approved post-secondary institution

If credit score and financial history are in good shape, refinancing could be a great way for you to lower your interest rate.

 

When to Consolidate Student Loans

Consolidating and refinancing student loans both offer several unique benefits. If you’re having a hard time deciding which is right for you, here are a few circumstances in which you should consider Direct Loan Consolidation:

  • If you hold multiple federal student loans
  • If you’re using or plan to use an Income-Driven Repayment plan
  • If you’re eligible for Public Service Loan Forgiveness
  • If you’d like to extend your repayment term
  • If you want to keep your federal student loan servicer
  • If you’d like to keep your federal benefits including deferment or forbearance

 

When to Refinance Student Loans

If you have a good credit score and would like to lower the interest rate on your loans, student loan refinancing could be right for you. Here are a few other signs of when to refinance student loans:

  • If you have a significant amount of private loans
  • If you want to combine federal and private loans into one payment
  • If you’d like to choose between a fixed and variable interest rate
  • If you’re interested in changing your repayment term
  • If you have a good credit score and want to lower your interest rate
  • If you’d like to refinance a Parent PLUS Loan to your child

 

Can You Refinance Student Loans After Consolidation?

If you’ve already consolidated your student loans but now want to refinance, don’t worry! Even though you’re only eligible for federal consolidation once (unless you refinance to add additional loans), you can refinance your student loans even after consolidation.

Additionally, if you are wondering how many times can you refinance student loans, you can refinance an unlimited number of times, so take the time to research whether refinancing might improve your interest rate or other factors of the loan.

 

Which Is Right For You?

Federal student loan consolidation means simplifying your student loan payments without letting go of your federal benefits. Student loan refinancing, on the other hand, means lowering your monthly interest rate if you have a strong financial track record. Even if you’ve already consolidated your loans, you still have the option to refinance anytime.

Choosing the financial path that is right for you and your budget is paramount. Compare the terms, interest rates and benefits of your current student loans against multiple lenders and decide if switching is worthwhile. 

Then, figure out what you can comfortably pay each month and how long you intend to make payments on the loan (our loan payment calculator helps borrowers choose a loan term that fits different budgets). Finally, take a look at our application process or give us a call at 1-844-601-ELFI.* 

Whether you choose to consolidate federal student loans, refinance a combination of private and federal student loans, or refinance private student loans, our team works as your advocate, steering you in the direction that is right for you and your budget.

 


 

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.

*Subject to credit approval. Terms and conditions apply.

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2020-10-20
Engineering School Student Loan Refinancing

Student loan refinancing is a fantastic option in many high-earning professions, and engineering is no exception. Most engineering students pursue bachelor’s degrees, and the average engineer’s student debt falls roughly in line with the national average of $35,173.    While engineers work hard to earn their degrees, the payoff is oh, so worthwhile. The average entry-level salary for engineers is $57,506, and the average salary across all experience levels is $79,000. This varies by the type of engineering you choose, as well. Big data engineers are among the highest-paid in 2020, with a median salary of $155,000.   Engineering students are often top candidates for student loan refinancing because of their low debt-to-income ratios. Here are a few more things you should consider refinancing your engineering student loans:  

Benefits of Student Loan Refinancing for Engineers

Student loan refinancing is a strategy that can help engineers better manage and pay off debt. When you refinance your engineering student loans, a private lender will “purchase” your debt from your original lenders. You can request rate quotes from several different lenders, then refinance with the one that offers you the most competitive rate. Decreasing your interest rate means you’ll pay less over the life of the loan.   Here are just a few of the benefits of student loan refinancing for engineers:
  • Ability to consolidate student loans into one monthly payment
  • Option to choose between fixed and variable student loan refinancing interest rates 
  • Chance to earn a lower interest rate, potentially lower than federal student loans 
  • Opportunity to change your student loan repayment term
  To see how much you could save by refinancing your engineering student loans with Education Loan Finance, try our Student Loan Refinance Calculator.*  

How to Refinance Engineering Student Loans

Refinancing your student loans is normally a quick and simple process, and you can apply in minutes at home. If you’re curious about the process of refinancing, take a look at our student loan refinancing guide.   Researching lenders has very few downsides. Most lenders prequalify applicants using a soft credit check, which won’t hurt your credit score. Just know that before you can officially refinance your loans, your lender will likely need to do a hard credit check.   Here are the next steps to take if you’re thinking about refinancing your engineering student loans:
  • Figure out which how much or which loans you’d like to refinance. 
  • Make sure you meet student loan refinancing eligibility requirements.
  • Shop around and compare pre-qualified rates from multiple lenders. 
  • Submit an application to refinance your student loans 
  • Finalize the loan application by reviewing the loan terms & signing the documents provided by the lender. 
 

Alternatives to Pay Off Engineering Student Loans

If student loan refinancing doesn’t seem like the right fit, you have plenty of alternatives to explore. From student loan assistance to student loan forgiveness, engineers may qualify for a variety of repayment options.  

Student Loan Forgiveness for Engineers

  Select engineers may qualify for Public Service Loan Forgiveness (PSLF). If you do qualify, you’ll make payments for a specified amount of time, normally 10 years, then the remaining balance will be forgiven. You will, however, still have to pay taxes on the forgiven amount.   Here are a few ways in which engineers may qualify for Public Service Loan Forgiveness:
  • Working in areas of national need could provide up to $10,000 in loan forgiveness over five years of service
  • Working for a non-profit, government agency, or other eligible employers could provide loan forgiveness after 120 payments (10 years)
  • Working as a teacher could provide up to $17,500 in loan forgiveness if working at a low-income school or other eligible agencies
  If you aren’t sure which is right for you, research student loan refinancing vs. PSLF. While both may help decrease your debt, it’s important to know how they compare before taking the next steps.  

Income-Based Repayment Plans

If you don’t qualify for Public Service Loan Forgiveness, you may also choose to pursue an income-based repayment plan. These types of plans set a monthly payment as a percentage of your income. Income-based repayment may be a good fit for entry-level engineers who are still working toward higher salaries.   Here are a few types of income-based repayment plans available to engineers:
  • Pay-as-You-Earn (PAYE): PAYE plans are based on a percentage of your adjusted gross income and family size. They are available to individuals who borrowed after 10/1/2007, or those who received eligible Direct Loan disbursements after 10/1/2011.
  • Revised Pay-As-You-Earn (REPAYE): REPAYE plans are similar to PAYE plans, but do not have date restrictions on the loans. They do take your state of residence into consideration, however.
  • Income-Based Repayment (IBR): IBR plans require you to be experiencing financial hardship. If you qualify, they are based on a percentage of your adjusted gross income and family size.
  • Income-Contingent Repayment (ICR): Many individuals who can’t qualify for PAYE or IBR plans apply for ICR. These start as a percentage of your adjusted gross income, then grow as your income grows.
 

State Student Loan Assistance Programs

Engineers are highly valued in the professional world. Some states and private organizations have created student loan repayment assistance programs for STEM professionals, with the goal of encouraging students to pursue these careers.   If you’re an engineer looking for student loan assistance, here are a few examples of state-driven programs you may be eligible for:
  • Harold Arnold Foundation
  • Wavemaker Fellowship
  • North Dakota DEAL Loans
 

Employer Student Loan Repayment Assistance Programs

Some employers provide student loan repayment assistance as a job benefit, which operates similarly to a 401(k). You designate a certain dollar amount to your student loan payments each month, and your employer matches your contribution up to a cap amount. These types of benefits can help improve employee retention rates while supplying necessary financial aid.  

Refinance Your Engineering Student Loans with ELFI

If you’re ready to refinance your engineering student loans, ELFI can help. By refinancing your engineering student loans with ELFI, you’ll enjoy benefits including:
  • No application fees 
  • No origination fees
  • No penalty for paying loans off early
  • If approved for refinancing, ELFI has a referral bonus program
  Ready to get started? Learn more about student loan refinancing with ELFI and apply today: https://www.elfi.com/student-loan-refinancing/.*  
  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.   *Subject to credit approval. Terms and conditions apply.
Woman struggling with student loan refinancing misconceptions
2020-10-16
7 Common Student Loan Refinancing Misconceptions

Refinancing is kind of like leveling up. After months or even years of working hard to become debt-free, you then gain access to a higher tier of borrowing - better terms, a lower interest rate or a smaller monthly payment. Many people have misconceptions about student loan refinancing, however, which keep them from taking advantage of the benefits that student loan refinancing has to offer.   If you're new to borrowing, it's easy to get scared of changing anything about your loan repayment process - even if that means losing out on the money that refinancing can save you. Here are some of the most common student loan refinancing myths - and what you need to know instead.  

Refinancing Student Loans Takes Too Long

Don't fall prey to the misconception that student loan refinancing is a lengthy, tedious process. In fact, refinancing student loans is usually very straightforward. You fill out an application and wait a couple of days for the lender to run your credit report and verify your personal information. Once that’s been completed, you’ll be presented with the refinance offers you qualify for.   The total length of time from beginning to end should take a couple of weeks. This also depends on how quickly you respond to questions from the lender and provide any additional forms or information they request.  

Student Loan Refinancing Has Expensive Upfront Costs

Unlike mortgage refinancing, student loan refinancing has no upfront costs like application or origination fees. That’s also why there’s no downside to applying for a student loan refinancing multiple times.   Plus, most lenders don’t charge a prepayment penalty, which is a fee for repaying the loan ahead of schedule. The only fee you’ll pay is the stated interest rate. You may owe a late fee if you make a payment after the due date, but that can be avoided if you set up automatic payments.  

You Need a High Income to Refinance Student Loans

While some lenders require that borrowers have a high income to qualify for student loan refinancing, others are more lenient. All lenders, however, care about the debt-to-income (DTI) ratio, which is your monthly debt payments divided by your gross income. Most lenders want a DTI percentage below 50%.   To calculate your DTI, add up your monthly debt payments including mortgage, car loan, personal loan, credit card payment and any other loans. Include a rent payment if you don't own your property. Then, divide that total figure by your gross or pre-tax monthly income.   If your DTI is below 50%, then you’re likely a good student loan refinancing candidate. If it’s higher, then you need to increase your income, decrease your monthly housing payment or pay down some of your debts  

You Need a Perfect Credit Score to Refinance Student Loans

Another misconception about student loan refinancing is that you need an excellent credit score to qualify, but lenders often accept borrowers with credit scores as low as 660. This is great news for young borrowers who haven’t built a strong credit history yet, or who ran up some credit card debt in college.   What may hurt your chances of being approved are any recent late payments, bankruptcies, defaults, liens or recent applications for other loans or lines of credit. Before applying to refinance your student loans, check your official credit report at AnnualCreditReport.com.   About one in five people have a mistake on their credit report, which can lead to an application being denied. Look at your credit report from all three credit bureaus - Experian, Equifax and TransUnion - and make sure you recognize all the accounts.   If you notice a mistake, file a dispute directly with each of the credit bureaus. It may take a few weeks to have it removed from your credit report. Make sure to follow up and verify that it’s been deleted.   You can check your credit score for free through a bank or credit card provider, or a service like Credit Karma. If your score is 660 or higher, you can feel free to apply for student loan refinancing.   You can increase your shot of being approved by applying with a cosigner. A co-signer is someone who agrees to assume legal liability for your debt if you stop making payments and default. The loan will also show up on the cosigner’s credit report.   Even if you can be approved to refinance by yourself, you may receive lower interest rates if you apply with a cosigner.  

You Can Only Refinance Once

A common misconception is that you have only one opportunity to refinance your student loans. In reality, however, there’s no limit on how many times you can refinance. Many choose to refinance every time the Federal Reserve decreases interest rates because they can get a better deal on their student loans.   The only thing that might affect how often you can refinance is your credit score. If your credit dips below a certain threshold, then a lender may not approve your application. Also, you may be denied if you lose your job or your income drastically plummets.  

You Refinance All Your Student Loans

Many borrowers have a mix of federal and private student loans and assume they have to refinance all those loans at the same time.   But borrowers can choose to refinance the loans they want. They can keep their federal loans as they are and only refinance their private loans. If they have a private loan with a low interest rate and one with a high interest rate, they can choose to only refinance the latter.   In some cases, borrowers may have a better chance of being approved if they only refinance some of their loans instead of all of them.  

Student Loan Refinancing is a Confusing Process

When you apply to refinance with ELFI, you’ll be matched to a member of the Personal Loan Advisor team. Every time you call ELFI, you can speak to that same person. This minimizes the confusion and frustration involved with the refinancing process.   As of 10/19/2020, ELFI has a 4.9 rating on Trustpilot with more than 1,200 reviews. More than 90% of those are five-star reviews. ELFI also has an A+ rating from the Better Business Bureau.  
  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.
Man feeling overwhelmed by student loans
2020-10-15
What to do When Your Student Loan Payment is Overwhelming   

Having student loans is not unusual. In fact, 45 million people have them. It’s also incredibly common to feel overwhelmed by your student loan payments.   A survey of student loan borrowers found that almost 65% of respondents said they lose sleep because of the stress caused by their loans. If you find yourself overwhelmed by your monthly student loan payment, there are some options you should consider to lessen the burden.   Before you can explore alternatives, however, you need to know the types of loans you have. Certain options are only available for federal loans as opposed to private loans. Check the Federal Student Aid website to determine any federal loans you may have, and request your free credit report to see any private loans. Once you’re familiar with your loans, you can consider new courses of action.  

Create a Budget

If you don’t already have a budget, create one! This will allow you to see if you can afford your current student loan payment. It will also show you areas where you’re spending unnecessarily. If you find there just isn’t enough income to cover all your necessary expenses, then you can begin working on different ways to reduce your student loan payment.  

Research Different Payment Plans

If your federal student loan payment is overwhelming, consider switching to a different payment plan. When you initially begin repayment, your loans are automatically put on the standard repayment plan. On this plan, your payments are based on a ten-year repayment term.   A Direct Consolidation Loan can help you change your payment plan to help make your payment more affordable. It can also help consolidate multiple federal loans into one loan. (Note: Consolidating your federal loans is different from student loan refinancing, discussed below.)   This will help you qualify for certain longer repayment plans, resulting in a lower monthly payment. One of the drawbacks of extending your payment term is you will end up paying more in interest costs over time.  

Income-Driven Student Loan Repayment

Certain loans are eligible for income-driven repayment plans. They can help make your payments more affordable and are based on your income and family size.  

Graduated Student Loan Repayment

If an income-driven repayment plan does not work for you, you can change to a graduated repayment plan. Your payment will begin low and increase over time for a ten-year term.  

Extended Student Loan Repayment

Another option is an extended repayment plan. To qualify, you must have certain loans over at least $30,000. Your payment may be fixed or may increase over time for a 25-year term.  

Look Into Refinancing

If you have overwhelming private or federal student loan payments, consider student loan refinancing. Refinancing may lower your interest rate and reduce your monthly payment. This is a good option even if your current payment fits your budget.   Refinancing can help lower your monthly payment, and can also save you thousands of dollars in interest over the life of the loan. Refinancing means obtaining a private loan to pay off your existing student loan or multiple loans.   Student loan refinancing differs from consolidation, which is only for federal student loans and may not necessarily reduce your interest rate. You can refinance private or federal loans, or both, and can also change your student loan repayment term to better fit your needs.   Here is an example of how refinancing can save you money:   If you have $65,000 of student loans with a 6% interest rate and have 10 years remaining on your loans, you will pay approximately $722 per month. If you refinance and qualify for a lower interest of 3.61%, your monthly payment would be reduced to approximately $646 per month. This equals savings $76 per month in savings. You will also save more than $9,000 in interest over the life of the loan.   To see how much you could save, try ELFI’s Student Loan Refinance Calculator.*  

Increase Your Income

Of course, increasing your income is easier said than done. If your student loans payments are becoming overwhelming, however, it may be a necessary step. Increasing your income through overtime hours or a side hustle can make your payments more manageable. A side hustle can be as easy as babysitting or dog walking, or more involved like starting a side business based on a passion.   If you haven’t begun repayment on your loans, but know you will face a significant loan payment after graduation, consider these steps:  

Build a Budget Early

Start a budget before repayment begins that includes your future student loan payment. This will allow you to see if you will be able to comfortably afford your payment. It will also help you build an emergency fund and a strong financial foundation.  

Seek Employer Student Loan Benefits

Look for an employer that offers student loan assistance. The number of companies that are offering student loan benefits is increasing, although the benefit is still rare. Some offer monthly benefits that can help you pay your loans off faster. Others offer a yearly benefit amount for a certain number of years. Either way, extra money from an employer to help pay loans will help you reduce your loan amount faster.  

Work Toward Public Service Loan Forgiveness

Apply for employment that may qualify for forgiveness. If you have federal loans, certain employment can qualify for forgiveness under the Public Service Loan Forgiveness program. Certain loans and types of employment are required so be sure to pay close attention to the requirements.  

Bottom Line

If you have an overwhelming student loan payment, explore your options to reduce your payment while furthering your debt-free journey.  
  *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.