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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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Man researching about discharging refinanced student loans
2020-05-29
Are Refinanced Student Loans Dischargeable?

If you have refinanced your student loans in the past, you may be wondering whether your refinanced loans can be discharged. The short answer is yes, but only under specific circumstances of which most individuals do not meet the criteria, and if you do meet the criteria, it can still be a very difficult process. Read on to see what circumstances allow for refinanced student loans to be discharged, and what you can do to ease the burden of private student loan debt if you don’t meet the criteria for discharge.

 

What is Student Loan Discharge?

To begin, it’s important to understand what the term “discharge” means in regard to student loans. Often used interchangeably with student loan forgiveness, these terms actually apply to different situations:

  • Student loan forgiveness is usually based on the borrower working in a particular occupation for a period of time, such as within the Public Service Loan Forgiveness (PSLF) Program. For private student loans, loan forgiveness is essentially non-existent.
  • Student loan discharge is usually based on the borrower’s inability to repay the debt or the borrower not being responsible for the debt because of fraud.
 

Discharging Refinanced Student Loans

Refinanced student loans are essentially new loans taken out with a private lender – so when talking about whether refinanced student loans are dischargeable, you should look at them like private student loans. Here are some situations in which private student loans may be dischargeable. Keep in mind that private student loans are very rarely discharged and that this shouldn’t be considered a realistic option.

 

Disability

While federal student loans are dischargeable for individuals who are “totally and permanently” disabled, private student loans aren’t necessarily subject to this rule. However, some private lenders do offer loan discharge in situations of disability. If this applies to you, contact your lender for more information – many lenders review requests for financial assistance on a case-by-case basis and will show compassion toward the situation.

 

Bankruptcy

If you’re seeking to have your refinanced student loans discharged, filing for bankruptcy could possibly be a last-resort option – however, it is very difficult and unlikely to happen because student loans aren’t categorized as dischargeable debt. According to the U.S. Bankruptcy Code, in order to have your federal or private student loans discharged through bankruptcy, you must prove undue financial hardship on yourself and your dependents, which is a difficult and expensive process that will most likely require a separate lawsuit and an attorney. This process is so difficult that most people who file for bankruptcy do not attempt to include their student loans. If you are unable to prove undue hardship, you will be obligated to continue repaying your student loans, and if you’re currently having your wages garnished due to default, they will continue to be garnished.

 

There are also some pretty substantial drawbacks to filing bankruptcy that could have a lasting impact on your life.

 

Drawbacks of Filing for Bankruptcy

It Could Hurt Your Credit Score

If you currently have a good credit score (700 or higher), filing for bankruptcy is likely to bring it down substantially, making it more difficult to obtain financing for a mortgage, car loan, or personal loan.

 

It Will Show on Your Credit Report for up to 10 Years

As if a ding to your credit score isn’t bad enough, filing for bankruptcy will show on your credit report for up to 10 years, which can not only affect your ability to obtain financing, but also could be seen by potential employers and affect your hireability or be seen by landlords and affect your ability to find rental housing.

 

Your Cosigners will be Liable for your Debts

If you have any cosigners on your loans, they will become responsible for your debts that you no longer owe.

 

Loss of Property and Real Estate

Occasionally, not all personal property and real estate will fall under exemption when bankruptcy is filed. This means that the bankruptcy court may seize your property and sell it for the purpose of paying your debts to creditors.

 

Denial of Tax Refunds

As a result of filing bankruptcy, you may be denied federal, state or local tax refunds.

 

Ways to Ease Private Student Loan Debt

If the burden of your refinanced student loans appear to be too much for you to handle, there are several actions you can take to help ease the pressure.

 

Take Stock of Your Finances

While this may go unsaid, making changes to your financial habits and budget may help you set aside the money to afford your monthly payments. Take stock of your income, savings and how you are currently spending your money. Perhaps you also have federal student loans that you could consolidate or refinance as well, or maybe you have a few subscriptions that you don’t need and can cancel. Making small changes to your financial habits can make a big impact.

 

Contact Your Lender

While you may not qualify to have your refinanced student loans discharged, you may find it useful to contact your lender to learn about the options available to you. Many lenders will offer a temporary deferment or forbearance in times of economic or financial hardship. Being transparent with your servicer may allow you to avoid missed payments, which can have pretty significant impacts on your credit score.

 

Consider Refinancing Student Loans Again

Did you know there’s no limit to how many times you can refinance your loans? While you may have already refinanced your student loans once, refinancing them again may be an option to consider, depending on whether your financial situation has changed or if interest rates have dropped. If your credit score improves or you get a raise at work, you may be able to qualify for a lower interest rate. Even if you haven’t seen a big change in your financial status, you may be able to extend your loan term and lower your monthly payments. Check out our Student Loan Refinancing Calculator to examine how changing the length of your loan term may help you save on monthly payments.*

 

Ask for Employer Assistance in Student Loan Repayment

In an effort to be competitive in recruiting and provide relief to employees, many employers are offering (or considering) student loan repayment assistance as an added benefit to employees. If your employer isn’t currently offering this benefit, consider asking if there’s potential for it to be added. Now is actually a great time to make this proposal, as a recent provision within the Coronavirus Aid, Relief, and Economic Security (CARES) Act allows employers to contribute up to $5,250 tax-free annually to their employees’ student loans until December 31, 2020. Send your HR department a well-written letter or have a formal meeting to discuss this opportunity.

 

Conclusion

You may find that getting your refinanced student loans or private student loans discharged isn’t any easy process. However, there are actions you can take to ease the financial burden that your student loans are causing. Visit the ELFI blog for more helpful tips and resources for paying off your student loan debt.

 
 

*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.

college student refinancing student loans
2020-05-26
Can You Refinance Student Loans While in School?

If you have student loans you probably have wondered what’s the best way to handle them. Should you wait to pay them after graduation or start paying them while in school? Or maybe you have heard about student loan refinancing and are wondering if it is right for you. Read on to find out one way you can manage your student loans that will benefit you right now.  

What is Student Loan Refinancing?

When you refinance student loans you take out a new loan to pay off one or multiple federal or private student loans. You will have a new loan term and presumably a lower interest rate. You can refinance to a new loan with the same amount of years left as your old loan or stretch out the term to allow a longer time for repayment. If you increase the amount of time to repay this will lower your monthly payment but likely will cause you to pay more interest over the loan term.   

Can You Refinance Student Loans While in School?  

The short answer is yes, but it may be difficult to find a lender that you can refinance with if you are still in college. Many lenders require a Bachelor’s degree as an eligibility requirement for refinancing. The other
requirements to refinance* with ELFI include: 
  • You must have a credit score of at least 680 and a minimum yearly income of $35,000. 
  • Must have a minimum credit history of 36 months.
  • Must be a U.S. citizen, the age of majority. 
  If you cannot currently meet these requirements, you can have a cosigner that fits these requirements.     If you have federal student loans some may argue you should wait to refinance them until you graduate because they offer more flexibility with deferment and forbearance. However, some private lenders also offer deferment and forbearance options. Some other things to consider are:
  • If you think you will get a job in the public sector that would qualify for Public Service Loan Forgiveness, you may not want to refinance because you would lose the benefit of having your federal student loans forgiven under the program. 
  • If you think you will want to take advantage of an income-driven repayment plan when you graduate, you may not want to refinance because this is only offered for federal student loans. Tip: Be aware that when you take advantage of income-driven repayment plans, your monthly payment is lower, but you will end up paying more for the loan in interest costs.   
  There are many benefits to refinancing while in school to put you on a better financial path when you graduate. The average college graduate has $31,172 in student loans. However, you can work to reduce that amount by refinancing. Student loan refinancing can be beneficial for many reasons: 
  • Consolidate - Refinancing allows you to consolidate multiple federal and private student loans into one new loan. You can refinance some or all of your loans. Consolidation makes it easier to manage one loan as opposed to multiple loans. With only one loan you will be less likely to miss a due date, and avoid any associated late fees. 
  • Lowers Interest Rate - When you refinance you can potentially qualify for a lower interest rate. A lower interest rate saves you in interest costs over the life of the loan. 
    • If you have unsubsidized federal student loans (the ones where interest accrues while you are in school) your loans could be growing by an average of 4.53%. But if you refinance you may qualify for a lower rate, as low as 3.86%, and less interest would be accruing. 
  • Lower Monthly Payment - If you score a lower interest rate when you refinance you will be paying a lower monthly payment. To find out how much you could potentially save, use our Student Loan Refinance Calculator.*  
  • New Lender - Do you always have trouble with customer service when you want to ask a question about your loan? When you refinance, you can get a new lender if you choose. It’s great to find a lender with high customer reviews. At ELFI we pride ourselves on providing award-winning customer service. 
  • Fixed Interest Rate - if you have a loan with a variable interest rate it may be more advantageous to refinance and lock in a fixed interest rate. With a variable interest rate your payment can increase when interest rates increase, which could put a financial strain on your budget. 
  Important tip: if you refinance while in school and after graduation your credit score and income increase, you can always try refinancing your loan again to possibly get an even lower rate.*   

Conclusion

Researching how to handle your student loans while still in school is a great initiative to set yourself up for a strong financial future after graduation. Student loans may seem like a heavy burden, but utilizing resources available to you will make the monthly payments easier on your budget.  
  *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.
Person reading news about student loans in coffee shop
2020-05-15
This Week in Student Loans: May 15

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:
person calculating the savings when refinancing

Consumers are refinancing loans as a form of personal stimulus

Despite the economic callout due to the coronavirus pandemic, Americans are using historically low interest rates to refinance their loans as a form of personal stimulus during the pandemic. The article explains how mortgage refinancing volume has skyrocketed and how the low-interest rate environment is also applying to student loan refinancing.  

Source: Yahoo Finance

 

Government building

House Democrats scale back $10,000 student-loan-forgiveness measure

On Thursday, House Democrats introduced an amendment to their $3 trillion coronavirus relief spending package that significantly scaled back a student-debt provision, also known as the HEROES Act, because of its higher-than-expected cost.  

Source: Business Insider

 

Government proposing HEROES Act

HEROES Act promises 5 ways to help your student loans

As mentioned above, House Democrats proposed a new $3 trillion stimulus bill called the HEROES Act to provide financial assistance to Americans due to the coronavirus pandemic. Read about the five changes this act includes in the Forbes article.  

Source: Forbes

 

millennial debating whether to pay student loans during CARES Act suspension of loan payments

Coronavirus pauses federal student loans for 6 months — should you pay anyway?

The CARES Act put a pause on all student loan payments through September 30 – but should you pay anyway? This Fox Business article argues that if you have the financial means to do so, you might consider continuing to repay your school loans or even refinance your student loans in a low interest rate environment.  

Source: Fox Business

    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.