Student Loan Refinancing & Your Dating App

November 13, 2018

When understanding student loans or any part of the finance industry for that matter, you’ll notice similarities. One significant similarity is that all requested borrowers of a loan will have their information reviewed by an underwriter. It sounds complicated, but in reality, the guidelines of a loan underwriter’s job are relatively simple. In fact, you could say that the entire application process works like that of a dating app and the underwriter is the Tinder® that will get you there.

Swipe Left-

On a dating app, you’re not going to swipe right on everybody. Well, we hope that you have some standards for yourself! Similarly, when applying to refinance student loans, you’ll find different criteria or standards for companies. In a dating app, it’s usually pretty superficial first. The same can be said for student loan refinancing data. You see, student loan refinance lenders will have mandatory requirements like minimum student debt, minimum credit score, and others like institution attended.

The guidelines are pretty straightforward at this point to determine if you could be a good fit for the lender. If you are not, at this time a good fit for a lender, keep trying! Work on that credit score, assuming it’s something that can be fixed. If someone swipes left, that’s okay. It’s better to determine it now, than have it not work out later after you’ve invested significant time, energy, and emotion.

Swipe Right-

Dating and financial stability are relatively comparable. Both take a long time to build and can be destroyed with one simple mistake. To gain back stability, it could take years, but that shouldn’t stop you from living your life and doing what’s best for yourself. Though it can be daunting, there are times when you’ll hit it off! If you “matched” with the lender you’ll move on to your application process or the case of a dating app slide on into the DMs.

Getting That “Match”

Congrats, you’ve now moved on to the next level! You’ve received your notification and will start getting to really know one another. In the case of a lending institution, it can be a bit more formal. You’ll likely be submitting required documents at the time of your application. These documents differ based on the lender. Documents that are typically requested include, W-2, pay stubs, and government-issued ID.

The Date

Once you’ve worked your way through the application form or direct messages, it’s time for the date. Yes, the date! Here’s where your underwriter really comes into play. An underwriter is someone that is hired by a financial institution to evaluate requested borrowers. An underwriter reviews the information that a requested borrower submits and determines if they are a good fit. Consider the underwriter your dating app, it allows you to get to know someone and learn more about them.

In some cases, an underwriter may feel that they do not have adequate information and may request that additional information be provided. This can be common in the case of adding a cosigner, being recently employed, or other circumstances. Don’t be thrown off if additional information is requested. Just like when you’re messaging, and your match throws you a curve ball. If you see it through both things could work out well for you.

Long Term

If your date worked out well for you, it’s likely you may want to go on another one. Fortunate for you, when it comes to student loan refinancing you can always continue to refinance your student loans through other vendors to get the best interest rate available. Once you’ve completed the application process and worked with an underwriter if needed, you’ll either receive an acceptance or a notification with details as to why your loan was not approved. When you’re dating well, there could be many possibilities. One of those possibilities could include getting ghosted. Regardless, we hope that it’s the beginning of a long and happy relationship for you both!

10 Facts About Student Loans That Will Save You Money

Federal Scholarships for College

It’s a big part of the American Dream: graduating from college to pursue a productive and rewarding career. In fact, Americans value a college education so much that our federal government awards over 120 billion dollars in annual aid to help students achieve this goal. Much federal financial aid is in the form of student loans, work-study programs, and tax credits for education. However, the government also awards “free money,” which often doesn’t have to be repaid. Instead of calling this type of award a scholarship, the government calls it a federal grant. Grants are awarded based on need, plus special conditions and circumstances. A federal scholarship or grant could be your ticket to a great education at a lower cost.

Federal Grants & Private Scholarships: What’s the Difference?

You may be eligible for both federal grants and scholarships from your college, state, service club, foundation or business. One of the main differences between the two types of aid is the application process. Each private scholarship has its own process, and you must carefully adhere to the instructions and meet all deadlines if you hope to qualify. Eligibility for a federal grant is determined using the comprehensive FAFSA® form, which students submit to apply for all federal student aid (grants, loans, work-study and other types of federal assistance). An exception to this is military ROTC scholarships and VA programs, which have varying application processes. ROTC and VA applicants must go through the appropriate service branch or agency to apply. Private scholarships are frequently awarded on merit (scholastic or athletic achievement), specified condition (area of study, heritage, college or state) or financial need. Sometimes, more than one criterion is used to determine the award. Federal grants are based primarily on need, although some federal programs have been established for specific purposes like promoting teacher education or community service. Such grants may have additional requirements, like academic achievement and service commitment, in exchange for education benefits. Likewise, scholarships awarded through U.S. military ROTC programs come with a specific commitment to serve.

How Do You Apply for a Federal Grant or Scholarship?

Application for federal grants begins by filling out the Free Application for Federal Student Aid (FAFSA®) form. To apply for scholarships through military ROTC programs, you must apply with the associated military branch. Application for VA benefits can be accessed through the Dept. of Veterans Affairs website. The Dept. of Defense also offers scholarships and graduate fellowships with their own application process. Links to these federal sites are listed here:

Resources for Grants & Scholarships Through the Federal Government

Check out these federal grant programs that could help you lower the amount of money you have to borrow to attend college.

Pell Grants:

These grants gave eligible students a maximum amount of $6,195 toward their education in 2019 - 2020. Students may receive this assistance for up to 12 semesters of college. Available To: Undergraduate Students Qualifications:

Must show exceptional financial need.
Have not earned a bachelor’s, graduate, or professional degree. May be eligible if enrolled in a post-baccalaureate teacher certification program.
Must not have been incarcerated in a federal or state correctional institution.

Amount Received Dependent On:

Expected Family Contribution (EFC). Defined by the Department of Education as “an index number that college financial aid staff use to determine how much financial aid you would receive if you were to attend their school.” The FAFSA form information is used to calculate this. The formula takes into account your family’s taxed and untaxed income, assets, benefits, family size, and the number of family members who will attend college.

Cost of Attendance – Expected Family Contribution = Financial Need

Cost of Attendance. Determined by your school for your program.
Attendance Schedule. Will you be a full-time or part-time student?
Are you attending school for the entire year or just a semester?

Federal Supplemental Educational Opportunity Grants:

This is an additional grant program distributed by participating colleges and allocates anywhere from $100 to $4000 toward a recipient’s undergraduate education. Submitting your FAFSA early can have a direct impact on this type of grant. Each school sets its own deadline for campus-based funding. You should be able to see the deadline on the school’s website and if it’s not there be sure to speak with a member of your financial aid office. Available To: Undergraduate Students Qualifications:

Must show exceptional financial need.
Have not earned a bachelor’s, graduate, or professional degree.

Teacher Education Assistance for College & Higher Education (TEACH) Grants:

You must also be pursuing a career in teaching. In order to qualify you will need to teach at the elementary or secondary level school in a high-need field in a low-income area after graduation. Available To: Undergraduate Students, Post Baccalaureate Students, or Graduate Student (Attend a Participating School) Qualifications:

Enrolled in a TEACH-Grant-eligible program.
Meet academic achievement requirements (scoring above the 75th percentile on one or more parts of a college admissions test or maintaining a cumulative GPA of at least 3.25)
Receive TEACH counseling to explain the terms and conditions of the service obligation. Must complete counseling each year you receive a TEACH Grant.
Sign a TEACH Grant Agreement to Serve.

Iraq & Afghanistan Service Grants:

Eligible students who lost a parent in military service and do not meet the need-based threshold for a Pell Grant can apply for additional college funds through this program. Available To Qualifications:

Not eligible for the Federal Pell Grant due to Expected Family Contribution.
Meet Federal Pell Grant requirements for eligibility.
Parent or guardian was a member of the U.S armed forces, who died as a result of military service performed in Iraq or Afghanistan after the events of 9/11.
Under 24 years old or enrolled in college at least part-time at the time of the parent or guardian’s death.

SMART Scholarship Program:

The Dept. of Defense offers undergraduate scholarships and graduate fellowships to encourage participation in the STEM sciences and recruit future civilian employees for the DoD. Available To Qualifications:

Must be a U.S., Australia, Canada, New Zealand, or United Kingdom Citizen at the time of application
As of August 1, 2019, must be 18 years of age or older.
Ability to participate in summer internships at a DoD facility.
Willingness to accept employment post graduate for DoD
Minimum of 3.0 on a scale of 4.0 and in good standing.
Pursuing one of these disciplines for undergraduate or graduate degrees.

Jobs to Reduce Student Loans

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2019-05-07

What is a Prepayment Penalty? What’s the Catch?

Imagine finally paying off your loan just to find out you owe the lender more money! All because you’ve paid your debt off early. Instead of your lender rewarding you for paying the loan off earlier than your contract states, they charge you extra. Here’s what that is, how to avoid it, and what you can do.

What is a prepayment penalty?

A prepayment penalty is a fee charged to a borrower. If you pay off your loan earlier before the date planned in the contract the lender could charge you a prepayment penalty. A prepayment penalty is charged once you’ve completed paying your debt, if it was paid it off early, or it could be a fee for overpaying the scheduled amount set per year. A prepayment penalty can be a fixed amount or based on what the remaining balance of your loan was set to be. For example, certain loans may allow you to pay off 20% extra each year before facing a fee.

What are prepayment penalties for?

When you borrow from an institution, they assume that it will take you a certain amount of time to repay the debt back, with interest. If you pay back your debt sooner, that institution may lose out on the interest that they collect. For this reason, loans like a mortgage might have a prepayment penalty to discourage people from refinancing or selling within the first few years. You can think of a prepayment penalty as a way for the institution to ensure that it makes an adequate return amount for the credit they lent. Additionally, lenders charge prepayment penalties because if they place the loan in security and sell it, they need verification that the loan will be outstanding for a particular period of time. Having the security outstanding for a period of time will provide the buyer of the security a yield.

Student Loans

There are so many benefits to paying extra on your student loans each month. One of the main benefits - you’ll pay less interest over the life of the student loan. When it comes to student loans, you may be surprised to find out that there are no prepayment penalties. That’s right no prepayment penalties for both federal and private student loans. According to the Higher Education Opportunity Act of August 2008: “It shall be unlawful for any private educational lender to impose a fee or penalty on a borrower for early repayment or prepayment of any private education loan.” Before you begin making extra payments towards your student loans, you should contact your servicer. Verify that the additional payment is being applied to the principal balance of the loan and not to the interest. If the overpayment is directed to the principal you’ll be able to pay down the debt faster.

Mortgage Loans

Mortgages don’t always have prepayment penalties, but some do. If there is a prepayment fee on your mortgage you should be able to review the details in the mortgage contract. It’s vital when signing a contract that you pay attention to the fine print. If you don’t understand something or need further clarity, be sure to ask questions. When dealing with Mortgages, if you chose to refinance your loan there could be a prepayment penalty. Typically if you choose to refinance within the first three or five years of having the loan there may be a prepayment penalty fee that applies. If you ever have any questions about prepayment fees you should contact your mortgage lender for clarity.

Auto Loans

When taking out an auto loan there are two types of interest that may be used in your contract, simple interest or pre-computed interest. Simple interest works similarly to a student loan, it is calculated based on the balance of the loan. Therefore, if you have an auto loan with simple interest, the sooner you can pay your loan off, the less interest you’ll pay. The other type of interest is pre-computed interest. This interest is included in your agreement. It is a fixed amount calculated and added on at the beginning of the contract. Using a pre-computed interest rate is typically when you encounter prepayment penalties. Similar to mortgage loans it isn’t guaranteed that these loans have a prepayment penalty, but if so, it should be in the contract. Be sure to contact your lender or institution that services the loan to find out if there are any prepayment penalties before paying extra towards your debt.

Personal Loans

Personal loans can be used for a number of different reasons, from medical expenses to travel or even wedding expenses. When it comes to the prepayment penalty for personal loans, most companies will charge a percentage of the remaining balance. Though it’s likely your personal loan won’t have a prepayment penalty, you could still have one. Check with your lending institution or be sure to closely review your contract to see if there are any penalty fees for paying your debt down earlier.

Soft Penalty vs. Hard Penalty

You may have heard of two different types of prepayment penalties: soft and hard. A soft prepayment penalty would charge you a fee for refinancing, but not for other situations. A hard prepayment penalty would charge you for refinancing, prepayment, or selling (in the case of a mortgage - selling your house).

How can prepayment penalties affect you?

First, assuming you have multiple bills and debts that you pay each month, knowing whether any of them have a prepayment penalty can change how you pay. Imagine you have a student loan and a mortgage loan, you know the student loan doesn’t have any prepayment penalties, but the mortgage loan does. Let’s say that you’ve received some additional income and you want to put it towards one of the loans, but you aren’t sure which one. You’ll want to pay additional money toward the student loan debt because you won’t get penalized for paying it off early. Knowing a loan you’ve applied for has a prepayment penalty might motivate you to find a different borrower and give you the freedom to pay off that debt sooner without a fee. Does this mean you should never pay off debts early? No way! There are plenty of loans and other types of debts that won’t have a prepayment penalty. The important thing is to know what you’re getting into. Read the fine print and ask questions during the application process. Also, for loans like a mortgage, there is typically a page you sign toward the end of the process that includes disclosures on things like whether there is a prepayment penalty, balloon payment, and so on. Always be aware of those disclosures before you take on new debt.

What is lifestyle creep? Is it affecting you?

Girl looking to complete her FAFSA application before deadline while outside enjoying the sun and ocean.

2019-05-01

Why Completing FAFSA Early Is Critical

The process of completing the FAFSA application might be something you’ve complained about. If you haven’t complained about it yourself, it’s likely you’ve heard others mention as not their favorite thing to do on a Saturday night. Though difficult, it is a crucial step for college attendance each year. Sorry—it’s unavoidable! Doing your FAFSA early can be a huge benefit, it makes it a little easier to get motivated and start the process as soon as you can. Why is it so crucial to complete your FAFSA early each year? Here are the reasons why completing the FAFSA early each year are imperative to your financial future.

An early application means a better chance at more money.

If you do your FAFSA early, you’ll have a better chance at more federal financial aid or school financial aid. The FAFSA application can be submitted for the next year of college starting October 1. That sounds early, but the sooner you get it in the better your chances for getting financial aid. For example, some colleges award their aid on a first-come, first-serve basis. If you wait too long, the school’s available financial aid may have been awarded to other students that did the FAFSA sooner. The same applies for federal financial aid. Only so many funds are available, and the institutions can’t wait until the last minute to select who gets awarded the aid. They often dole out aid earlier in the window. Meaning the earlier your application is submitted the better chance you will have at receiving financial aid.

Get your Student Aid Report faster.

If you file closer to that October 1 deadline, your Student Aid Report will arrive sooner. This gives you a better idea of where you stand for aid awards faster. The faster you have that report, the sooner you can start planning for how you’ll pay for the rest of your upcoming academic year. Having more time to apply for loans or look for other forms of aid will take the weight off of your shoulders!

Skip the stress of procrastinating.

Get it out of the way! There are so many things that you have to do to prep each semester. From registering for classes to picking up housewares and finding a roommate to getting your parking permit. Preparing for the upcoming academic year can usually mean a long to-do list. Plus, you will be wrapping up the previous semester. Do you really want to be worrying about FAFSA when you’re trying to study for exams? Not a chance! You don’t want to be overwhelmed with the amount of work it takes to complete the FAFSA. Be wise and get it out of the way and clear yourself up for focusing on other tasks.

These deadlines are real.

There’s not a lot of leniency if you don’t get your FAFSA done in time. Those deadlines are serious, and even being a little late could mean that you’re not eligible at all. Yikes! You don’t want to miss out on aid that could have saved you money on student loans just because you flaked on the application process. Plan ahead and get it done.

Other FAFSA Tips

Even if you don't think you'll qualify for aid, it's still a good idea to complete the application. Some schools have increased their income levels for aid. The application may be required to qualify for other types of scholarships at some colleges.
You generally have until the end of June to file, but some states and schools have earlier deadlines. Know what those deadlines are so that you’re not kicking yourself later!
Does your school use the CSS Profile? That’s an additional application required by 400 major colleges and it’s just as important as FAFSA. Check with your financial aid office to verify.
When FAFSA changed a few years ago from the January 1 start date to October 1, this also changed the tax information you need to submit. You don’t have to wait until January 1 to file because you use the previous tax year’s information. For example, taxes from 2018 won’t be used until October 1, 2019, which will apply to the 2020-2021 school year.

If you have any questions about FAFSA or any other aspect of financial aid, don’t wait to talk to an advisor or someone in your school’s financial aid office. They specialize in these topics and are there to help make sure you get as much aid as you deserve. All you have to do is listen, be on the ball, and get all of your paperwork in order to make this happen!