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Student Loan Refinance & Consolidation

February 8, 2016

When entering college most student loan applicants are treated equally, as far as interest rate and repayment terms. Once you’ve graduated and established yourself in the financial world, you should have built some responsible financial habits. We mean you pay your bills on time, pay over the minimum amount, and overall don’t put yourself in a bad or risky financial situation. All these things help to improve your credit.

When you’ve established a solid borrowing history, it can really benefit to look into refinancing or consolidating your remaining student loan debt. By “benefit” we mean you could see substantial savings on your student loan debt, but how do you know what’s best for you? Refinancing and consolidating student loan debt can be complicated so let’s take a look at the benefits of each.

Student Loan Debt Consolidation

Consolidation is taking multiple loans and combining them into one. This provides one easy and simple payment instead of having multiple different payments due for each loan. When consolidating your student loan debt it’s common for borrowers to extend the life of their loan to have a lower monthly payment. Be cautious though this may look like an attractive and smart idea you may end up paying longer over the entire life of the loan. Typically, when consolidating you can lose out on benefits like principle rebates or loan cancellation, because you’re using a different lender.

If loans with different interest rates are being consolidated what interest rate does that leave you with? When you consolidate multiple loans together the interest rates will change. Lenders will use the weighted average of all your interest rates. The term of the repayment can also change. Be aware that there are federal student loan consolidations and private student loan consolidations.

 

Federal Consolidation

Private loans are not eligible for consolidation through the government. It’s important to note here that once you consolidate your student loans through the federal government they cannot be reconsolidated through the federal government again unless an additional loan has been added.  To qualify for federal student loans you must meet the below criteria:

  • Leave school, graduate, or become a part-time student
  • Have the loan types listed here to qualify
  • Loans must be in repayment or in the grace period

 

Consolidating your federal loans can lower your monthly payment, you may have access to Income-Based Repayment depending on the type of loans you have, and variable-rate loans can be switched to fixed interest rate loans or the weighted average of the interest rates on loans being consolidated, rounded to the nearest one-eighth of one percent.  Now that we understand what federal student loan consolidation is like, let’s review private student loan consolidation.

 

Private Student Loan Debt Consolidation

Private lender requirements will vary based on the lenders available. It’s important to understand that private lenders will have different ways to qualify borrowers. You may be approved for consolidation with one company and not with another. When you are looking for private consolidation on your loans take into consideration the ability to refinance. When you refinance with a private lender there are multiple benefits.

Refinancing Student Loan Debt

What to Know-

Refinancing is combining multiple student loans into one. You can pick and choose which loans you want to refinance and which loans not to include. The main benefit to refinancing is not only for one convenient payment but you can receive favorable interest rates and change the repayment terms, thus allowing borrowers to receive less interest accrual over time. Before considering refinancing your student loan debt you want to make sure you meet the below:

  • Steady and favorable income
    • Income doesn’t include bonuses
  • Good credit score
  • You have a good debt to income ratio

Be aware that if you’re seeking Public Service Student Loan Forgiveness, if you refinance with a private lender you will be losing that ability. Don’t think that as a borrower you need to choose between refinancing with a private lender and federal student loan consolidation. You can pick and choose what loans to consolidate and which loans to refinance based on your unique situation.

 

9 Questions to Ask During the Refinancing Process

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Female medical student standing next to professor
2019-10-17
Medical School Debt: Why Now May Be the Time for You to Refinance Student Loans

The road to becoming a doctor is a long and expensive one. After 4 to 5 years of undergraduate studies, 4 years of medical school, and 3 to 7 years of residency, many graduates are well into their 30’s before they earn a doctor’s income. Residency does come with a paycheck, but the average Resident Physician makes $58,803 a year, according to glassdoor.com. It's hard to imagine much of that is applied to medical school debt.   Americans owe a total of $1.6 trillion in federal and private student loans and newly-minted doctors carry a good portion of those loans, carrying an average of $179,000 in medical school debt, six times more than the average graduate.   Student loans can be a financial and emotional burden, even for doctors, and consolidating and refinancing those loans can be a relief on both fronts. With consolidation, you can roll multiple loans into one, leaving you with a single monthly payment. This simplifies repayment. Refinancing means agreeing to new and different terms of your loan with the goal of getting a better interest rate or term. Better rates and terms can make medical school debt more manageable.  

Why Now is the Time to Refinance

Monthly principal and interest payments on student loans can bury many borrowers. A lower interest rate can help you save thousands of dollars over the life of your loans. Better rates also mean you can pay down that medical school debt faster, also helping you pay less in the long run.   The importance of refinancing now is that you can start saving immediately. Depending on what you qualify for through private lenders like ELFI1, you could lower your interest rate, have a single monthly payment, lock in a fixed interest rate, and more. All helping you to enjoy the fruits of your hard work faster.   Another reason to refinance now is that the Federal Reserve Board lowered interest rates twice already this year. This federal interest rate applies to banks—it’s the amount of interest they charge each other to lend federal reserve funds. The benefit for you, as a borrower, is that the less interest banks pay, the less you can potentially pay.  

Refinancing Federal vs Private Loans

In our blogs, we regularly discuss the difference between private student loans and government student loans. Keep in mind, the differences between these loans come back into play for refinancing.   Regardless of your initial loan type, when you refinance your medical school debt, you take out a new loan with a private lender – ideally at a meaningfully lower interest rate. With this new private loan, you can lose access to federal benefits like:
  • Income-driven repayment plans
  • Ability to pause payments through deferment and forbearance programs
  • Loan forgiveness programs
  ELFI has a team of Personal Loan Advisors who can help you decide if refinancing makes sense for your situation. As always, we encourage borrowers to look for student loan refinancing loan options with no origination fees or application fees first.  

Downfalls to Refinancing Medical School Debt

Other than losing out on federal borrower benefits, refinancing your loans might not make sense right now. If you already have a low-interest loan, you might not see much savings. To see what you can save, use ELFI’s savings estimator tool.   Additionally, some banks charge fees that could potentially offset any interest savings. With ELFI, you’ll never pay:
  • Application fees
  • Origination fees
  • Prepayment penalties
  Finally, if you’re still in your residency or fellowship, it might make sense to wait until you have a higher income or better credit score, both of which will impact the interest rates available to you. Or you might considering having a cosigner to help you achieve an even lower rate.  

Other Options to Payoff Medical School Debt

While refinancing can lower your monthly payments and get you a better interest rate, there are other options for lowering your medical school debt.   Consider overpaying your monthly amount. This option isn’t realistic for all borrowers, but if you’re savvy enough to live simply or lucky enough to apply a spouse’s paycheck, you can quickly pay down that medical school debt. Some graduates might even have the option of taking out a zero-interest (or ultra low-interest) loan from relatives or friends. Once the student loan is repaid, you can put the excess funds toward other debts or investments.  

Understanding Your Loan Refinance Options

It is important to explore all your options when opening an initial student loan. It's equally as important to explore the best refinancing options for reducing your medical school debt. If you need help navigating those options, contact ELFI. As pioneers in the space, our management team has over 30 years of expertise in student loans and student loan refinancing.     1Subject 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.
Adult students walking in collegehall
2019-10-16
Can I Refinance My Student Loans and Go Back to School?

Many Americans, at one time or another, have thought about their student loans as they contemplate whether or not they can afford to go back to school and pursue additional higher education. Maybe you were able to partially pay your way through college, but couldn’t quite close the gap, so you turned to federal student loans or private loans  to make ends meet. You may have been accepted into your first-choice school and you made the financial leap using student loans to fund the degree of your dreams. Whatever the case may be, you’re now in a situation where you need to change your current student loan structure in order to go back to school and take the next step in your education. Student loan refinancing may be the best option to help you lower your monthly payments and allow you to go back to school with financial peace of mind.  

So I Can Refinance My Student Loans and Go Back to School - But Why Should I?

  The short answer to the question “Can I refinance my student loans and go back to school?” is often a “yes”. There are lots of options for dealing with student debt, and those options change depending on the amount of your current student loan debt, whether your current student loan is federal or private, and what you’re looking to achieve through student loan refinancing. This means that no matter what your financial situation, you can almost certainly take advantage of a student loan refinance through a reputable private lenders such as ELFI1 provided you can meet credit criteria established by each lender.   One
advisor stipulates that you should only take out new student loans that won’t overburden your financial situation by taking on too much debt or “overleveraging”. Overleveraging means taking on more debt than your income can comfortably pay for, as measured by financial ratios such as “debt-to-income ratio,” or DTI. If you already owe a lot on your current student loans and have the financial means to afford new student loans, then you might want to consider refinancing the student loans you already have to make room for the new monthly debt payments you will have on the additional student loans you take out. That’s good news for graduates who shelled out a pretty penny for their undergraduate degree.   In general, the best reasons to refinance your student loans - if you’re taking on new debt to go back to school - would be to:
  • Get a lower interest rate (and potentially lower monthly payments)
  • To take advantage of new federal or private loan programs that may be financially suitable to you, or
  • To consolidate the student loans you already have with a single, private lender rather than dealing with multiple lenders on your existing student loans.
 

Is a Student Loan Refinancing My Best Option? 

  Student loan refinancing does have some benefits that other options, such as debt consolidation programs, would not (like allowing you to release a cosigner from your previous loans). One big benefit you’ll likely receive from student loan refinancing is a lower monthly payment. The federal student loan debt consolidation program, unlike student loan refinancing with private lenders, averages the interest rates of your existing federal loans and rounds up the weighted average interest rate by an eighth of a point, so while the interest rates of some of your loans may go down, others will go up to meet the average set in the consolidation process. That means that your interest costs likely won’t change all that much, if at all.   There are many reasons to explore refinancing your student loans, including improving your interest rate, payment timeline, or ability to take on new loans with the money you could save each month. Other benefits include releasing a cosigner from one or more loans, getting better customer service or benefits than you currently get from your lender, or having the convenience of making a single monthly payment instead of multiple payments. Consider using an industry-leading private lender such as ELFI for a fast loan prequalification experience (in as little 2 minutes!) that can get you the student loan funding you need.  

What Factors Should I Consider When Deciding on a Student Loan Refinance?

  A few of the factors most graduates need to consider when refinancing their student loans have to do with not only payment size, interest rates and terms, but also the type of loan they will refinance into and their own personal financial situation. Keep in mind how this may improve your ability to get better terms or rates on your current loan or on any new student loans you end up pursuing after your refinance in order to go back to school.   For example, many graduates considering a student loan refinance in order to go back to school don’t know that there is no federal student loan refinancing program. Both private and federal student loans can be refinanced with a private lender, but neither federal nor private loans can be refinanced into new federal loans. What you started with is what you get when it comes to your federal student loan - unless you refinance with a private lender.  Federal student loan rates are set by the US congress and mandated by law - you can’t get a better deal or any rate concessions the way you might be able to do with a private lender.   Another big factor when it comes to deciding on a student loan refinance is your personal financial situation. While this is often the first question that graduates looking at a student loan refinance ask themselves, it should be asked again - can you afford new student loans to go back to school, even if you get the refinancing terms and rates you want for your current student loans?

How Do I Choose the Right Time to Refinance My Student Loans?

  Some financial experts and financial bloggers, such as NerdWallet, suggest refinancing the minute you have the credit score and income to support getting a lower interest rate, regardless of whether you want to go back to school and take on new loans in the process.   Beyond this, and the obvious timing issues presented by deciding on whether, or when, to go back to school, be aware that your income, credit score and debt situation will have an overall impact on whether you can get the student loan refinance terms you want. Making sure to weigh all your options and pick a reliable lender who can help walk you through all your loan options. ELFI’s personal Loan Advisors are trained to help you navigate this process and to simplify it for you.  

How Do I Choose the Right Student Loan Refinancing Option?

  While there are many reputable student loan refinance providers available, expert and impartial voices like NerdWallet and Student Loan Sherpa agree that ELFI (Education Loan Finance)  is one of the best. With multiple loan options, flexible repayment structures, and best-in-class customer service, ELFI can make your dreams of refinancing your student loans and going back to school a reality. ELFI also goes a step beyond and provides each borrower a personal loan advisor to help them navigate the process.    

Final Thoughts

  No matter what your degree field or career aspirations, most graduates will be faced with the choice of whether to refinance their student loans, when to do it, and how to do it in a way that fits their lifestyle. Using a reputable student loan refinance company like ELFI can help you pick the best student loan refinancing option for you, especially if you intend to take out new loans and go back to school. Check ELFI out today for the best and latest in student loan refinance options and get on the road to the career of your dreams!   1Subject 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.
2019-10-09
Customer Review of Refinancing Student Loans With ELFI

Meet Daniel, a college graduate with an entrepreneurial spirit. He started his own tutoring business five years ago, and with the burden of student debt weighing him down, he decided to refinance his student loans this past year.   After applying for student loan refinancing with about 10 different companies, Daniel decided to go with ELFI. Here's why.     He wanted to make sure that he could get the best terms that he could. His new terms with ELFI saved him $162/month, and he's paying his loans for 5 fewer years. His loans were also consolidated into one monthly payment.   He wanted a company that matches you with one representative that assists you through the entire process. Amanda Scott, an ELFI Personal Loan Advisor, helped Daniel through the entire process of refinancing his student loans. As he says, "she was the very first phone call and the very last call I had with Education Loan Finance."   By refinancing his student loans with ELFI, Daniel freed up additional money every month that he can now use to provide for his growing family, fund the construction of his new home, save for retirement, and support his tutoring business.  
"It's a relief knowing that I have refinanced these loans – and that I can now go on with the rest of my life."
  Interested in seeing how much you could save by refinancing your student loans? Consult our student loan refinancing calculator.*  

Learn More About Student Loan Refinancing With ELFI

 

  *This is a paid testimonial. Education Loan Finance is a nationwide student loan debt consolidation program offered by SouthEast Bank, which is based in Tennessee. ELFI is designed to assist borrowers through consolidating outstanding loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions at www.elfi.com/terms. The interest rate and monthly payment for a variable rate loan may increase after closing. Interest rates 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 $11.00 per $1,000 borrowed. Rates are subject to change.