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Student Loan Refinancing

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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2020-03-20
A Lawyer’s Guide to Student Loan Refinancing

When Matt Sembach, an assistant public defender, graduated from law school, he had a mix of both private and federal student loans — some with interest rates as high as 10.75%.    

By Kat Tretina

Kat Tretina is a freelance writer based in Orlando, Florida. Her work has been featured in publications like The Huffington Post, Entrepreneur, and more. She is focused on helping people pay down their debt and boost their income.

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

When refinancing law school debt makes sense

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

1. You have high-interest student loans

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

2. You want to pay off your loans early

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

3. You want to simplify your payments

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

4. You want to reduce your monthly payments

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

5. You aren’t eligible for loan forgiveness

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

How to refinance your loans

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

1. Check the eligibility requirements

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

2. Get a rate quote 

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

3. Submit your application

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

Alternatives to student loan refinancing

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

1. Apply for PSLF

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

2. Apply for an income-driven repayment plan

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

3. See if you qualify for repayment assistance

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

Repaying your student loans

As a lawyer, you likely have a significant amount of student loans. While your loan balance can be a burden, student loan refinancing can help you save money and lower your monthly payments.     To find out how much you can save by refinancing law school debt, use the student loan refinance calculator.*  
  *Subject to credit approval. Terms and conditions apply.    Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
2020-03-17
#TorchStudentDebt Series: CMO Josh Phillips

Welcome to the first episode of our #TorchStudentDebt blog series! At ELFI, our goal is to empower a brighter future for those with student loan debt. We do this by offering competitive rates and flexible terms for student loan refinancing* as well as sharing helpful tips for helping you achieve financial freedom. In this exclusive blog series, we’re sharing the stories of individuals who have torched their student loan debt, covering everything from the challenges they faced to the tactics they used to eliminate their debt. Hopefully these experiences can provide you with some insight on how you can eliminate yours.   To kick this series off, we’re sharing the story of Josh Phillips, SouthEast Bank’s Chief Marketing Officer. Note: SouthEast Bank is the parent holding company of Education Loan Finance.   

Background

Josh is a Brimley, Michigan native that decided to go to college for the same reason that many of us do – to learn and make more money. His first job was picking up shingles around construction sites for his father, who was a licensed builder. He worked at McDonald’s through high school, handing out food in the drive-thru and eventually moving up into the role of “maintenance man,” being in charge of facilities around the building.  
“The variety of jobs I had growing up taught me a lot… although I did enjoy some parts of them, I also knew that they weren’t what I wanted to do for the entire adult experience.”
  Like a good portion of millennials, Josh was a first-generation college student. This left him in somewhat of uncharted territory when it came to choosing a college and acquiring financial aid.  
“Being the first person in my family to go to college, I didn’t really have any idea what I was doing in terms of the best way to approach it. This was in the early 2000s, so there were some resources online to help guide you through the process, but not nearly the amount of resources as there are now on the internet.”
  Josh used the U.S. News and World Report college tool to do his research, made a shortlist of schools, and began applying and going on college visits. He ultimately decided to attend Maryville College (TN), a private liberal arts college in East Tennessee.   

Taking Out Loans

Going into college, Josh took the same view of his loans that many of us do – putting off the worry until after school.  
“I definitely didn’t actively think about the amount of debt I was accruing throughout my college education. Four years seemed like a ways away, so I kind of took the approach of, ‘do what you have to do to get the education and experience you want,’ and worry about those minor details afterward.”
 

Facing Reality

Josh graduated with a double major in International Business and Political Science, but he also graduated with around $55,000 in student loan debt that consisted of both federal and private student loans.   
“At that point in time, I had loans in a variety of places – so it was kind of like this slow, painful trickle of letters coming in telling me how much I owed different lenders. I wouldn’t say it was completely demoralizing, but it definitely made me understand that this was going to be one of the major payments that I’d be making on a monthly basis for a good length of time.”
  This was in 2008, right before the bottom fell out of the market. Josh was lucky to find a job with a small startup prior to graduating and transitioned into that after school. He believed that working for a startup would give him the opportunity to potentially grow with the company and accelerate his career faster, but it was definitely a roll of the dice.  
“I heard the rule that you shouldn’t go into more student debt than what your first year’s salary will be upon graduation… well, I broke that rule.” 
  The startup Josh worked for was a marketing and advertising agency that was going through a transition from traditional marketing to digital marketing. Josh was an Account Manager and had the opportunity to work with a number of their larger, newer customers and also assist with general business operations.   

Strategy for Paying Down Debt

When Josh transitioned into his new role, he didn’t have much of a strategy for paying down his debt. He simply wanted a job that allowed him to meet the minimum monthly payments and afford his living expenses. As his role within the company grew, he began focusing more heavily on ways to eliminate debt.  
  Using these strategies, Josh was able to pay down his $55,000 in student loan debt in just seven years.  

Regrets Along the Way

Despite the impressive timeframe in which Josh paid off his student loans, he did mention that he had some regrets about how he went about it.   
“Looking back, I took out extra money to cover living expenses while I was in college… If I had to do it again, I would have probably tightened those purse strings more when I was in school, because living on borrowed money just costs you more and more over time.”
  He also mentioned that he wished he would have known about his ability to refinance student loans and lock in a better interest rate. He said that doing so would have allowed him to save on interest and possibly even extend his repayment period so that he could prioritize other financial goals, like saving for retirement.    In hindsight, he also wished he would have looked into scholarships and financial aid earlier in the process, as many others with student loan debt do.  

Being Debt-Free

As one would assume, Josh is happy to now be free from his student debt.   
“I mean, it’s great – I think any time you can eliminate debt, it just opens up new options. Whether you want to go into more debt for a new car or a bigger house, or maybe you just want to get to the point where you don’t owe anyone anything, paying down debt almost gives you a bit of a high. It’s great to see the number going down, and once it’s gone, you kind of want to turn around and figure out what you want to pay down next. Currently, my last debt is my mortgage.”
 

Advice for Others with Student Loan Debt

When asked what advice he would give others with student loan debt, Josh emphasized the trade-off of having great experiences vs. being debt-free.  
“Everyone loves doing new things and getting new experiences, but I would always counter that with the freedom you can feel from getting out of debt. There are plenty of things you can experience for free if you’re creative or thoughtful about how you do it… If you’ve got debt that keeps you worried or at a job you don’t like, it’s a good trade-off to delay your experiences and instead put that money toward your own financial freedom.”
 

#TorchStudentDebt

That wraps up our first #TorchStudentDebt blog! Stay tuned for more stories of how others put strategies in place to torch their student loan debt, challenges they faced along the way, and advice they have for others still on their student loan repayment journey. Thanks for reading!  
 

About Education Loan Finance

Education Loan Finance, a division of SouthEast Bank, is a leading online lender designed to assist borrowers by consolidating and refinancing private and federal student loans into one simple, low-cost loan. Education Loan Finance believes that providing consumers comprehensive refinancing and consolidation options empowers the consumers on their financial 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.
2020-03-13
How to Compare Student Loan Refinancing Lenders

If you’re like most college students, you may have graduated from school with student loans. According to The College Institute for College Access and Success, graduates left college with $29,200 in student loan debt, on average.  

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.

  Even if you took out federal student loans, interest rates can be high, causing your loan balances to grow over time.   If you want to save money and pay off your debt as quickly as possible, student loan refinancing may be a smart strategy for you. However, there are literally dozens of refinancing companies out there, so how can you find the right one for you?   

What is student loan refinancing? 

When you refinance federal or private student loans — or even parent student loans — you take out a loan from a company like ELFI for the amount of your existing education debt. The loan you take out has different terms than your old ones, including interest rate, length of repayment, and minimum monthly payment.    When you refinance your debt, you can opt for a new loan term. You can extend your repayment term to up to 20 years to reduce your monthly payment and make it more affordable. Or, you can qualify for a lower interest rate and save money over the course of your repayment. You can even pay off your loans months or years ahead of schedule, freeing yourself from your debt.    Just how effective is student loan refinancing? ELFI customers reported that they save $272 per month, on average, and should see an average of $13,940 in total savings after refinancing their student loans.1   

How to find the best student loan refinance companies

When you’re shopping around for a lender, there are five steps you should follow before selecting a loan:

1. Assess your loan eligibility

Because refinancing loans are offered by private lenders, eligibility criteria can vary from lender to lender.   You may qualify for a loan from one lender, but not another. At ELFI, borrowers must meet the following criteria
  • You must be a U.S. citizen or permanent resident
  • You must have at least $15,000 in student loan debt
  • You must have a bachelor’s degree or higher
  • Your income is at least $35,000
  • Your credit score is 680 or higher
  • Your credit history is 36 months old or older
  • Your degree is from an approved post-secondary institution and program of study
  If you don’t meet the minimum lending requirements on your own, you may need a co-signer to apply for a loan with you. A co-signer is usually a parent, relative, or friend with good to excellent credit and steady income. The co-signer is responsible for making payments on the loan if you fall behind. 

2. Get instant rate quotes to compare interest rates

Before submitting your loan application, it’s a good idea to compare offers from different lenders so you get the lowest student loan refinance rates. Some lenders — like Education Loan Finance — allow you to get a rate quote online in minutes without affecting your credit score.*   With the prequalification tool, you can explore your options and choose what repayment terms and interest rate types work best for you before applying for a loan. 

3. Look at what borrower protections lenders offer

When you refinance federal student loans, you lose federal benefits like access to income-driven repayment plans and federal forbearance programs, so it’s important to pay attention to what benefits the refinancing lender offers.    Not all refinancing lenders have borrow protections, so make sure you read the fine print before selecting a lender. Otherwise, you could end up in a tough spot if you can’t afford your payments.    For example, if you’re unable to pay your loan because of a financial hardship or medical issue, you may be eligible for a temporary forbearance with ELFI. You could postpone your payments for up to 12 months, giving you up to a year to get back on your feet without worrying about your loans. 

4. Compare repayment terms

When comparing loan offers, there are a few key factors you should consider: 
  • Interest rate types: Some lenders offer fixed and variable-rate loans. Fixed-rate loans have the same interest rate — and monthly payment — for the entire life of the loan. Variable-rate loans have lower interest rates at first than fixed-rate loans, but they can fluctuate over time, causing your payment to change, too. Variable-rate loans make sense if you want to pay off your student loans as quickly as possible because you can take advantage of the initial lower rate. 
  • Interest rate: The rate you receive will affect how much interest accrues on your loan during your repayment. 
  • Length of repayment: A longer loan term will give you a more affordable monthly payment, but you’ll pay more in interest over time. A shorter loan term will have higher monthly payments, but you’ll pay less in interest charges. And, shorter loan terms tend to have lower interest rates than loans with longer terms. 

5. Research the lenders

Refinancing lenders vary widely in terms of customer satisfaction and accessibility. Before choosing a lender, research reviews online to get an idea of what to expect as a borrower.    For example, ELFI has over 800 reviews on TrustPilot, and a 4.9 out of 5 TrustScore.    You can contact ELFI for help by emailing answers@ELFI.com or by calling or texting 1-844-601-3534.*  

Tackling your student loan debt

Refinancing your student loans is a great way to save money, lower your payments, or pay off your debt early. But choosing the right lender is key.    If you’re not sure if refinancing is right for you, use the student loan refinancing calculator to find out how much you can save and how it would affect your monthly payments.*   
  1Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 2/7/2020 and 2/21/2020. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.   *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.