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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 $11.10 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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2020-07-02
Should You Keep Paying Federal Student Loans During CARES Act Suspensions?

You probably already know that the CARES Act has suspended Federal student loan payments for the time being. Until September 30th, you aren’t required to make payments, and the interest rate of your loans is set to 0%. This is primarily to help those with student loans who are struggling during these uncertain times. If your student loans are in forbearance due to the CARES Act suspensions, you have several repayment options based on your financial goals.

 

Option 1: Take Advantage of That 0% Interest

Normally, when making extra payments on student loans, your money is first attributed to any collections charges or late fees, then to accrued interest, then to the principal itself.

 

With the current 0% interest rates, however, if your account doesn’t have any fees or charges, you’ll save some money at that step. The more you can reduce your principal balance, the more money you’ll save over time in interest.

 

For example, let’s say you have $25,000 in student loans at a 4% interest rate and you want to pay it off in the next 10 years. Over that period, you accrue $5,373.54 in interest. However, if you take advantage of the CARES Act 0% interest, you can change the course of your repayment.

 

For instance, if you continue to pay your student loans during this period, the payments will be attributed straight to principal and will save you about $300 in accrued interest over the course of your repayment.

 

Option 2: Wait Until September And Resume Payments

If the coronavirus has affected your finances, don’t worry about paying down your student loans too quickly. Instead, use this time to get your other debts under control. Focus on paying back higher interest rate debt, like credit card debt, which will impact your long-term financial health.

 

Option 3: Refinance and Take Advantage of Low Interest Rates

During this time, many student loan refinancing companies are offering low interest rates. If you’re locked into an unfavorable rate, this would be a great time to consider refinancing student loans to save on interest costs.

 

This is an especially great option for borrowers with private loans, as these types of loans aren’t currently receiving any type of federal forbearance benefit. For a personalized look at how refinancing could improve your financial health, check out the ELFI Student Loan Refinancing Calculator.*

 

So, should you keep paying federal student loans during the CARES Act suspensions? The answer depends on your unique goals. Whether you choose to pay your federal loans, take care of other expenses, or refinance your student loans, this is a great opportunity to eliminate some additional debt before the September 30 deadline. Happy saving!

 
 

*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.

student loan news
2020-06-18
This Week in Student Loans: June 18, 2020

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:
photo saying legislation

NAACP And 60 Other Groups Call On Congress To Cancel Student Debt

After the federal government has provided student loan relief to all federal student loan borrowers through the CARES Act, a coalition of over 60 organizations including the NAACP, American Federation of Teachers, and the National Consumer Law Center are now calling Congress to cancel student loan debt altogether in their next stimulus package.  

Source: Forbes

 

low rates on federal student loans

Student Loans: 3 Ways To Get A Lower Interest Rate

This Forbes article lays out the three ways to get a lower interest rate on your student loans, covering options such as refinancing, borrowing a new student loan, or even switching to a variable rate loan.  

Source: Forbes

 

question mark

How to Pay Off Student Loans When You’re Broke

With many individuals struggling to pay off their student loans due to lack or income or overwhelming expenses, this Fox Business article lays out options for paying down student debt when faced with difficult financial circumstances.  

Source: Fox Business

 

student debt in america

How Student Loans Became a $1.6 Trillion Problem

With the cost of college increasing almost 25% in the past decade and total student loan debt reaching $1.6 trillion, this CNBC video offers a historical view of the path the U.S. took to arrive at this state.  

Source: CNBC

    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.

2020-06-17
Should You Prequalify With Multiple Student Loan Refinancing Lenders?

Depending on what kind of student loans you have, you could be stuck with high interest rates. For example, federal Grad PLUS Loans are currently at 7.08%. At such a high rate, you could end up paying thousands in interest charges.    By Kat Tretina   Refinancing your student loans can help you save money, but you should think twice before submitting a full loan application with multiple lenders. According to myFICO, the organization behind the FICO credit score, each hard credit inquiry can drop your credit score by up to five points.    Submitting several loan applications isn’t wise, but should you prequalify with multiple student loan refinancing lenders? Absolutely! By rate shopping with just a soft credit check, you can ensure you get the best deal.   

How student loan refinancing works

With student loan refinancing, you apply for a loan with a lender like Education Loan Finance for the amount of existing education debt you have, including federal and private student loans. The new loan has completely different terms than the old debt, including the interest rate and term length, and you use it to pay off the other loans. Moving forward, you have just one loan to manage with only one easy monthly payment.    What’s the advantage? With good credit — or with a parent, relative, or friend with good credit who acts as a cosigner — you can qualify for a loan with a lower interest rate. Over the course of your loan repayment, you can save a substantial amount of money by refinancing your debt.    For example, say you graduated from graduate school with $35,000 in PLUS Loans at 7.08% interest. If you made the minimum payments on a 10-year repayment term, you’d pay $13,939 in interest charges.    If you refinanced your loans and were willing to shorten the loan term to seven years, you could qualify for a 4% interest rate. You’d have a slightly higher monthly payment, but you’d be debt-free three years earlier. And, you’d pay just $5,186 in interest charges. By refinancing your loans, you’d save over $8,000. That’s a significant amount of savings you could put toward other goals, like building an emergency fund, buying a home, or starting a retirement nest egg.   Chart displaying the repayment examples for an original loan and refinanced loan, showing monthly payments, total interest paid, and total repaid.
Note: Figures are rounded to the nearest whole dollar.
  Use the student loan refinance calculator to find out how much you could save.*   

What is loan prequalification? 

With private loans, lenders decide whether or not you qualify for a loan — and determine your interest rate — based on your credit, income, and other factors.   Lenders often list a range of interest rates on their websites. While the lowest rates are tempting, you may not qualify for the lowest advertised rates.  The lender’s advertised lowest rates aren’t an indication of what rates you’ll actually get.    Only a select number of borrowers will qualify for the best terms. The lowest interest rates are typically reserved for candidates with the highest credit scores who opt for the shortest loan terms.   To give you a real idea of what rate to expect, some student loan refinancing lenders — like Education Loan Finance — offer prequalification tools. By entering basic information about yourself, you can get a rate quote without undergoing a hard credit inquiry. You can see what rates and loan terms you’d qualify for before submitting a full loan application.   

Should you prequalify with multiple student loan refinancing lenders? 

When you refinance student loans, rates and terms can vary widely from lender to lender. Some things to keep in mind when shopping around include: 
  • Interest rates: Your interest rate will have the biggest impact on your total repayment. When rate shopping, pay attention to the total APR to see what you’ll repay over the life of your loan. 
  • Rate type: While some lenders only offer fixed interest rates, which stay the same for the entire repayment period, other lenders also offer variable-rate loans. Variable interest rates often start off very low but can fluctuate over time. Education Loan Finance has both fixed and variable-rate loans.*
  • Loan term length: The shorter the loan length, the lower your interest rate. However, a shorter loan term also means a higher monthly payment. Depending on the lender, your loan term could range from five to 20 years.
  • Hardship policies: Not all lenders offer forbearance, so double-check the lender’s economic hardship policies. With Education Loan Finance, you may be eligible for up to 12 months of forbearance if you lose your job or face another financial emergency. 
  • Customer service: The quality of customer support is important as you make payments and have questions. ELFI has an award-winning customer service team and a 4.9 rating on TrustPilot.
There’s no downside to shopping around. With loan prequalification, there’s no impact on your credit, so you can get several rate quotes and find the best rates and loan terms for your situation.   Use the Find My Rate tool to get personalized rates without impacting 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.