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Student Loan Refinancing Basics

November 7, 2019

You’ve graduated and have a great job! You’re flying high and loving your post-grad life. But then your dreaded student loan bill comes. If your high-interest, scattered monthly payments bring you dread, you should consider student loan refinancing. Not sure what it is or if it’s right for you? Don’t worry! We’ve gathered all the most important information so that you can make the decision that is best for you and your wallet.

 

What is student loan refinancing and why should I consider it?

Student loan refinancing allows you to obtain a new interest rate by refinancing your current student loans into a new loan. Both private and federal student loans are eligible to be refinanced. Parents, if you took out student loans for your child, PLUS loans are also eligible for refinancing.

 

Oftentimes, when students first apply for private student loans, they have a lower credit score and, as a result, don’t obtain the best interest rate. Let’s say when you were 18 you signed up for private student loans with an interest rate of 9.5%. Now you have a steady income and a healthy credit score, qualifying you for a lower interest rate around 6%. Refinancing your student loans is how you can obtain that lower interest rate, and as a result, put more money in your pocket. To illustrate how much we really mean, get this: Our customers reported saving an average of $309 every month and an average of $20,936 in total savings¹. That’s a nice chunk of change!

 

Want to see just how much money you could save? Plug your info into our student loan refinance calculator to get your estimated rate and monthly payment*.

 

Is student loan refinancing the same as consolidation?

People sometimes confuse refinancing with consolidation. Consolidation is for people who have multiple federal student loans and want to combine them under one monthly payment. Consolidation does not lower your interest rate, it just makes the payment process easier by streamlining your loans into one payment. When you consolidate your federal student loans, you will receive a new interest rate. This new rate is the weighted average of your previous loans and rounded up one-eighth of a percent. If you want to lower your interest rate, you need to consider student loan refinancing. One added benefit of student loan refinancing, in addition to the lower interest rate, is that it can give you one single monthly payment.

 

How to know if refinancing student loans is a good fit for you

Refinancing your student loans can be incredibly beneficial for student loan borrowers, but it’s not right for everyone. Here are three signs refinancing is a good fit for you right now:

  1. You are gainfully employed – It’s best to consider student loan refinancing only after you have graduated, secured a job, and have a steady income.
  2. You have a strong credit score – Aim for at least a 680 before applying. The higher the credit score, your rates will likely be better.
  3. You don’t have a high debt-to-income ratio – Your debt-to-income ratio reveals how much debt you have in relation to your monthly income. A great DTI is 20% or lower, but in some cases you can qualify with a DTI of 40%. Obviously the lower the better! You can calculate your DTI with this formula: DTI = (Total of your monthly debt payments/your gross monthly income) x 100.

 

Of course, refinancing is not going to be the right option for everyone. Here are a few situations when refinancing may be a bad idea.

 

  1. You are giving up other benefits – If you qualify for student loan forgiveness through the federal government, then refinancing your student loans may not be the best fit for you because it will disqualify you from receiving this benefit. It’s worth mentioning that more than 99% of people who have applied for Public Service Loan Forgiveness (PSLF) have been rejected.
  2. You only have a few thousand dollars or a couple of years left on your loan – Most companies, including ELFI*, require a minimum dollar amount to refinance. For example, if you only have $3,000 left on your student loan, refinancing probably isn’t a viable option. To refinance student loans with ELFI you must have at least $15,000 in student loan debt.
  3. You already have a low rate and are satisfied with your monthly payments – Do your research to make sure your low rate is truly as low as it can be. If it is, why mess with a good thing?

 

If you don’t qualify for student loan refinancing on your own, you can apply with a creditworthy cosigner. If you choose to do so, your cosigner will need to have many of the same requirements as stated above.

 

How to refinance your student loans

Congrats! You’ve decided that refinancing your student loans is the best fit for you. Luckily, the application process with ELFI is quick, easy and 100% online. Remember, when researching student loan refinance providers, be on the lookout for application fees, origination fees, and prepayment penalties. With ELFI, you won’t pay any of these fees.

 

Here are the steps you need to take to refinance your student loans.

  1. Get prequalified – Getting pre-qualified will allow us to provide you with preliminary rates with just a soft credit inquiry that won’t affect your credit score.
  2. Gather your documents
    1. If you’re applying alone, you’ll need:
      1. Recent paystubs documenting the last 30 days of employment
      2. Previous year W-2
      3. Government-issued Identification
      4. Account information to make payments online
      5. Current Billing Statement or payoff letter for each eligible loan
    2. If you’re applying with a cosigner, they’ll need:
      1. Recent paystubs documenting the last 30 days of employment
      2. Previous year W-2
      3. Government-issued Identification
  3. Apply – Explore your options and select the plan with the rates and terms that best fit your needs. Each situation is unique so an ELFI Personal Loan Advisor can help advise you on the best options for you. For example, when applying you’ll have the option of selecting a fixed or variable interest rate.* You’ll want to review and discuss these options before signing on the dotted line.
  4. Send your documents electronically – We make it easy for you! Just send us screenshots or upload photos from your smartphone then sign the paperwork electronically.

 

Conclusion

If you’re eager to lower the amount of money you’re putting towards your student loans, refinancing your student loans is a great option. Refinancing can help you lower your interest rate and adjust your repayment terms. Ready to get started? Find out more here.

 


 

¹Average 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.

 

*Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. Terms and conditions apply. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. 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.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

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2020-01-21
5 Things to Do Immediately After Graduation

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.

 

If you’re in your senior year and preparing for graduation — congratulations! Graduating from college is a huge accomplishment.

 

But after the hat toss, you have to start worrying about things like finding a job. And, if you’re like most college students, you probably have student loan debt to manage, too. As you start preparing for graduation, here are five things you should do to handle your student loans.

 

1. Find Your Loan Details

You likely needed to take out several loans to pay for school. It’s common for graduates to have as many as 12 different student loans when they graduate from college. Worse, your loans can be sold and transferred to different servicers, making it difficult to keep track of your debt.

 

After you graduate, look up all of your student loans and figure out who your loan servicers are, what your monthly payment is, and your due dates.

 

Federal Student Loans

To find your federal loans, use the National Student Loan Data System. Just enter your Federal Student Aid ID and password and you can view all of the federal loans under your name. The site will list your loan servicer and loan balance. Once you have that information, you can go to the loan servicer’s website and create an account and start making payments.

 

Private Student Loans

For private loans, you can identify the different loans and lenders by looking up your credit report at AnnualCreditReport.com, which allows you to get one free credit report per year. Your credit report will show what company currently manages your loan. When you find your loan servicer, you can contact the company directly to find out how to open an online account and make payments.

 

2. Create a Budget

Your student loan payments will likely eat up a significant part of your monthly income, especially when you’re just starting out in your career. To make sure you can afford the payments and your other living expenses, spend some time creating a monthly budget.

 

While you can use software like You Need a Budget (YNAB), you can also make a budget with just a simple pen and paper. List all of your monthly income, including earnings from your job and side gigs. Next, list all of your expenses, such as rent, utilities, internet service, student loan payments, car payments, and insurance.

 

Hopefully, your income exceeds your spending. If that’s not the case, you’ll have to look for areas to cut to give you some more breathing room in your monthly budget. Or, you can boost your income by freelancing or launching a side gig.

 

3. Sign Up for an Income-Driven Repayment Plan

If your starting salary is too low, or if you can’t afford the payments on your federal student loans, consider signing up for an income-driven repayment (IDR) plan.

 

There are four different IDR plans. While the specifics of each plan vary, the general concept is the same: the loan servicer extends your repayment term and caps your monthly payments at a percentage of your discretionary income. Depending on your income and family size, you can dramatically reduce your monthly bill. In fact, some people qualify for payments as low as $0.

 

After 20 to 25 years of making payments, the loan servicer will forgive your remaining loan balance. While the forgiven amount is taxable as income, IDR plan forgiveness can still help you save thousands.

 

You can apply for an IDR plan online.

 

4. Refinance Student Loans

If you have private student loans or a mix of both federal and private loans and want to pay off your debt as quickly as possible, look into student loan refinancing. By working with a private lender to take out a loan for the amount of your existing debt, you could potentially lower your interest rate, helping you save money. Or, you could get a longer repayment term and reduce your monthly payments, making them more affordable.

 

How effective is student loan refinancing? The savings can be significant. According to The Institute for College Access & Success, the average graduate has $29,200 in student loan debt. If you had that much debt with a 10-year repayment term and a 6% interest rate, your monthly payment would be $324. By the end of your loan term, you’d pay a total of $38,902.

 

But if you refinanced your debt and qualified for a 10-year loan at 4% interest, your monthly payment would drop to $296 per month. Over the course of your loan, you’d repay just $35,476. Refinancing your student loans would allow you to save over $3,400.

  chart showing the difference between refinances student loan and original loan

While there are some drawbacks to refinancing your education debt, refinancing can be a smart way to manage your loans. If you decide that student loan refinancing is right for you, use ELFI's Student Loan Refinancing Calculator to get an idea of what your repayment plan could look like. Prequalification is 100% online, free, and won’t affect your credit score*.

 

5. Sign Up for Automatic Payments

Managing your different loans and their various payment due dates can be overwhelming. But missing a payment can hurt your credit, and you could be subject to costly fees and penalties.

 

Signing up for automatic payments is a great way to ensure you never miss a payment and improve your credit history.

 

The Bottom Line

Your college graduation may feel far off, but it’ll be here before you know it. When it comes to preparing for graduation, developing a student loan repayment strategy is essential. By creating a plan now, you can ensure you’re ready to handle your student loan debt when your payments are due.

 
 

*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.

2020-01-20
Minternship: A New Trend for Middle-Aged Adults

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 decades past, you would enter an industry and then spend your entire working career in the same field, often with the same employer. However, today’s economy is quite different. According to the
Bureau of Labor Statistics, people have 12 different jobs over the length of their careers, on average. Not only that, but they also may switch fields during the course of their lives.    In a 2019 Indeed survey, 49 percent of U.S. workers reported a dramatic career change. For example, they may have switched from marketing to engineering, or from teaching to finance.    If you’re feeling burned out in your current field, switching to a new career can help reenergize you. And while switching careers can be challenging, completing a “minternship” — an internship you complete after already starting your career — can help bridge the gap.   

What is a Minternship?

In August of 2019, BBC reported on the growing trend of minternships. Many millennial workers, frustrated in their current jobs, are using internships to relaunch their careers or completely switch their professional plans.    You can complete a minternship when you’re already advanced in your career, often when you’re in your 30s, 40s, or 50s. At this age, an internship can help you gain experience and test out a new field. And, it can provide essential networking opportunities so you can land a full-time job once you’re done.    During a minternship, you get hands-on experience in your selected field. You’ll work alongside professionals and learn the ins and outs of the business, completing projects and building your portfolio. Depending on the opportunity, minternships can be part-time or full-time commitments.   

Where to Find a Minternship

If a minternship is appealing to you, there are several different ways to find an internship that matches your interests:   
  1. Consider returning to school: In some fields, you may need to return to school to complete a certificate program, get an MBA degree, or earn a master’s degree to get a job. Many schools require students to complete internships, and will even help connect you with companies that are hiring. 
  2. Search job boards: Some companies post their internships on job boards like Indeed, Monster, and Internships.com. You can search by location, company, or field to find an opportunity that suits your needs. 
  3. Connect with your network: If you’re switching careers, consider reaching out to your network on LinkedIn or via email to share your goals and ask for help. 
  4. Ask your employer: Some companies — especially large ones — will help facilitate employees’ transitions to a new department. They may provide student loan repayment assistance for employees who go back to school, or they may offer on-the-job training programs. Talk to your human resources department to discuss your options. 
 

How to Prepare for a Minternship

While a minternship can be a great way to gain necessary experience, it may require you to make some lifestyle changes. To take on a minternship and leave your full-time job, you will likely need to adjust to a pay cut. To prepare for that and minimize its impact, follow these steps: 
  1. Explore financial aid: If you’re returning to school and completing a minternship, make sure you apply for financial aid, including grants, scholarships, federal student loans, and private student loans*. You may qualify for aid and loans to cover your living expenses so you can focus on your education and budding career. 
  2. Create a budget: Make a budget detailing how much money you’ll have coming in while you’re interning and how much you’ll spend each month. Account for regular expenses like rent or mortgage payments, utilities, groceries, and transportation. 
  3. Cut expenses: Once your budget is complete, look for areas where you can cut back. Perhaps you can add a roommate while you’re an intern, or you can use public transportation. 
  4. Find additional income sources: As an intern, you may need to be creative about how you earn money. While paid internships are possible, unpaid internships are common in certain fields. If that’s the case, consider launching a side hustle or freelancing or consulting in your old field to earn income. Or, you can take on a part-time job. 
  5. Refinance student loans: To reduce your student loan payments while you’re interning, you can refinance your student loans*. If you extend your repayment term, you could dramatically lower your monthly payments. You may pay more over time in interest thanks to the longer loan term, but it can be worth it to free up more money in your budget each month. 
 

Changing Careers

If your current job no longer excites or challenges you, it may be time for a change. Completing a minternship gives you an opportunity to learn new skills so you can successfully switch fields. While it will take some sacrifices and time to do, finishing a minternship can prepare you for a successful career change.    Do you need to borrow money to pay for school, or do you want to refinance your existing debt to lower your payments?    ELFI offers private student loans and student loan refinancing loans with competitive interest rates. There are no application fees, origination fees, or prepayment penalties. And, it offers a variety of repayment options and loan terms to suit your needs. You can use ELFI’s Student Loan Refinancing Calculator* to get a rate quote without affecting your credit score.  
 

*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.

2020-01-17
This Week in Student Loans: January 17

Please note: Education Loan Finance does not endorse or take positions on any political matters that are mentioned. Our weekly summary is for informational purposes only and is solely intended to bring relevant news to our readers.

  This week in student loans:
House of representatives

House Democrats Overturn DeVos on Student Loan Forgiveness

This Thursday, the Democrat-controlled House voted to overturn regulations introduced by Education Secretary Betsy Devos that eliminate the "borrower defense" rules introduced by the Obama administration. Critics have said the new regulations make it more difficult to get student loan forgiveness if a college suddenly closes. Sources say that the move to overturn Devos' new regulations won't pass the GOP-controlled Senate, however – and Trump is likely to veto the bill even if it does.  

Source: USA Today

 

signing legislation

Could Elizabeth Warren Really Wipe Out $1 Trillion in Student Loans in a Single Stroke?

Democratic Presidential Candidate Elizabeth Warren recently vowed to eliminate hundreds of billions of dollars in student loans on her first day in office if elected president. Her plan was released just before Tuesday night's Democratic primary debate. While the ability to erase debt is typically a decision left to Congress, student loans may be a different story due to a loophole involving the "Higher Education Act" passed in 1965.  

Source: CBS News

 

can't pay student loans

Study: Barely Anyone is Paying Off Their Student Loans

A recent study revealed that very few people are making progress on paying off their student loans, along with shifting factors in the nation's rising student loan debt. The study found that 51 percent of students who took out loans from 2010-12 haven’t made any progress in paying them off. Additionally, it showed that while in the past higher enrollment and rising tuition costs were the main drivers in the rising debt, slow repayments and amassing interest have now become the primary drivers.  

Source: NY Daily News

 
IRS building

IRS Issues Tax Guidance On Discharged Student Loans

The Internal Revenue Service recently issued guidance for some taxpayers who took out federal or private student loans and qualified to have their loans discharged. Typically, having loans discharged is treated as a taxable event, in which the forgiven amount is treated as income – but the tax break from the IRS allows the discharged amount to not be recognized as taxable income.

 

Source: Forbes

  That wraps things up for this week! Follow us on FacebookInstagramTwitter, or LinkedIn for more news about student loans, refinancing, and achieving financial freedom.  
 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.