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Student Loan Refinancing: How To Avoid Predatory Lending

No one wants to get scammed, but it can be hard to feel confident about whether you’re working with a reputable source or not. In an era when we have access to so many different options and there are countless financial entities available at our fingertips, there are definitely some things to keep in mind so that you don’t end up getting a raw deal.  It’s not uncommon if you’re interested in student loan refinancing, or have been approached by a company to want to see if they’re legit before you move forward. Here are some tips on how to avoid being a victim of predatory lending.

 

Check your sources.

It’s not uncommon to find random financing offers around the internet. Maybe you read about it on Reddit, saw a social media post, or even direct mail. Companies regularly send postcards and mailers to try to get your attention. The marketing material can look pretty convincing, too! Don’t let a slick landing page or a nice mailer fool you. You generally want to find suggestions from sources you trust, like a financial expert, or trusted online sources. A good resource would be the Better Business Bureau. You can see online complaints, information about the company, and all provided by an unbiased source. A second site that provides unbiased online reviews is Trustpilot. Websites with unbiased reviews and legitimate accreditation or backing can be an ideal source to verify credibility.

 

Never trust dishonest marketing.

It may sound extreme, but we’ve heard of examples where someone was approached by an entity that attempted to look like the government. These scare tactics are used frequently enough by scammy companies for one reason – they work. These companies use this scare tactic because when you think the government is trying to get in touch and you’re in trouble, you answer! These options work similarly to the IRS scams that are always happening with the IRS calling your phone, but in reality, the IRS doesn’t actually call anyone. If the company tried to look like a government program and later you find out they’re not, drop them. A legitimate company won’t send fake notices or use a misleading URL in order to get your business.

 

Listen to the old adage.

If it’s too good to be true, it probably is. There’s a reason that this simple advice is so often passed down. Really amazing offers are rare. If something sounds like there’s no way they could offer you such incredible terms or that great of a deal, there is likely fine print that’s missing. Fact check the offer and look for comparable data. Your alarm bells should go off if you’re looking at a company whose reputation is dubious. This especially proves true if they’re claiming to get you unheard of service or savings.

 

Requirements to Refinance Student Loans

 

What do I owe you?

There are lots of scams across all kinds of industries. One of the most common is when a person tries to get you to pay something up front with the promise of services to come. Lending is no different. If you have to pay a fee or anything before you can see the offer, chances are that this is a scam. Companies often will offer to facilitate student loan discharge for someone with a permanent disability. The process of applying for student loan discharge if you have a qualifying disability is free. Any company offering to do it for a hefty up-front fee is scamming you!

 

Avoid anyone who is too aggressive.

Sometimes a company will aggressively pursue potential borrowers and push them to select a consolidation option that’s not in the borrower’s best financial interest. They might be a legitimate company but will leave out crucial details in order to sign you up. A good general rule of thumb is to be aware of the interest rate and terms. Understand how a lower payment can extend the life of your loans, thus increasing the overall amount due. Always get all the details, so you know the financial implications of your decision.

 

Give it a gut check.

Sometimes your intuition is your best tool. If something doesn’t feel right, don’t be afraid to hit pause until you can find more information. Be wary of any company that’s asking for too much personal information before you are sure that they’re legit. Keep an eye out for things that just don’t seem right, like misspellings or a digital presence that seems fishy. You should never be faulted or made to feel bad for giving yourself time to look into the details and read everything over. If you feel like you’re being hurried through or your questions aren’t being answered stop and take a breather to do a gut check. All of your concerns should be addressed with ample information so that you feel confident about the process and decision. If that’s not what you’re experiencing, you should back away.

 

Use your village.

There are lots of reputable companies out there, and it’s pretty easy to find them by reading unbiased reviews. Do your research and continue learning more about how their process will help you. Use resources available to you to vet companies before you reach out. If you utilize the resources available to you, you’ll be less likely to encounter an unreputable company on the prowl.

You should never be badgered or threatened.

No reputable company is going to make threats against you or repeatedly harass you to sign up. As a consumer, you have certain protections and any company that violates these should be investigated. If you’re facing this treatment from any lender, would like to see more information on various types of financial products and your rights, visit the FDIC website.

 

 

Check Out Our Guide to Student Loan Refinancing

 

NOTICE: Third Party Web Sites
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.

How Does Divorce Affect Student Loan Debt?

Lots of millennials are waiting longer to get married so that they’re more secure before tying the knot. The divorce rate dropped 18% in the last several years. Even so, divorce still happens. It doesn’t have to be the end of the world. Maybe your uncoupling is a fresh start, and separating your finances is the first step to setting up your new life.

 

As a millennial, many of us have student loan debt that is just part of our everyday reality. That’s true whether we’re married, single, or divorced. This is why so many people often will end up seeking out help and advice about student loans during the divorce process. Answers aren’t always clear, but we can help. There are a few things you should know to prevent any financial surprises.

 

Can’t Divorce a Servicer

Student loan responsibilities after a divorce—particularly for Federal Loans—will be dependent on whose name is on the loan. If you and your ex-spouse agree on a payment arrangement that requires one of you to help pay, if it’s not in your name on the loan, that may not be enforced by the servicer. If your name is on the loan, you’re the one they’re going to pursue for payment.  That doesn’t mean you shouldn’t try to come to an agreement that works for both of you but stay on top of which of your loans are being paid. Make sure you never miss a payment even if your ex is supposed to be paying it.

 

Repayment Amounts and Plans

With divorce, your family size changes, as does your household income. Changes to income and family size can mean changes to your monthly payment. Now it’s likely these changes will only happen if you are on an income-based repayment plan. It doesn’t mean that your monthly payment will go down, but your loan payment could go up or down. The payment amount will depend on what your spouse’s income was when compared to yours, so everyone’s situation is unique. Make sure to update the paperwork and stay current on your loans as you transition to paying your debts on your own.

 

If you’re having trouble making payments, look at different repayment options like an IBR plan so that you stay current on your loan payments and don’t fall behind. If at all possible, avoid deferment. Deferring your loans ensures that you don’t fall behind on payments, but the interest continues to accrue while you are not paying. This could extend the life of the loan and increase the amount that you owe, so it really should be a last resort.

 

Credit Score

Some people think just filing for divorce will negatively affect credit, but that isn’t necessarily true. What can affect your credit is the process of changing your bills around. For example, putting things in solely your name that weren’t previously could affect your credit score. Making big financial changes like selling a house, refinancing, or restructuring debt can also have effects on your credit score. Some of those things could be good and some could lower your score, so it just depends on your situation. For example, adding on more debt without increasing your income could have a negative effect on your credit score.

 

If you are in the process of reassessing your financial situation on your own, you’ll want to review paperwork. Gather vital documents like your credit report and score. If you haven’t checked your credit report in a while, now is a great time too. Make sure there are no errors on your credit report and ensure that you know what your score is. You may be looking to make some changes that will certainly need a credit review. Changes could include looking for housing on your own, your own mortgage, changing the car you drive, or something else that will require a credit check. Don’t be caught off guard by not knowing what’s on your report right now.

 

State Laws

The laws will either determine the debt as separate property or marital property. Now, separate property generally includes things like assists obtained before marriage like that of inheritance. Generally paraphrasing anything obtained by an individual before marriage is considered separate property. Anything that remains outside of separate property typically is marital property. Marital property is where the state laws really play a role.

 

Your remaining marital property will be divided based on if you are located in “community property” state or an “equitable distribution” state. During a divorce in a “community property” state, any marital property is split down the center at fifty-fifty. Most states tend to fall into the “equitable distribution” state law. The “equitable distribution” law says that each party has a legal claim to the asset or debt. The portion of value that is then divided to each party is determined by a number of different factors according to The Court.

 

 

Cosigners and Private Loans

Private loans can be more complex. For instance, if your ex-spouse is a cosigner, then you are both responsible to pay the debt. If he or she was not your cosigner, the debt is the responsibility or you and your cosigner, if any.

 

It might be a good time to refinance loans.

Whether you are just entering the divorce process or have already completed, see if now is the time to refinance. Get in touch to have one of our friendly advisors walk you through the process and give you information on how we can help.

 

Divorce can be one of the most stressful events a person will face, but empowering yourself with information will make it easier to navigate. Be sure to consult with a lawyer before you start divorce proceedings so that you can prepare. Do your best to work together to come to an agreement that helps you both afford to live on your own so everyone can move forward.

 

Click for Requirements to Refinance Student Loans

 

NOTICE: Third Party Web Sites
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.

Marriage and Student Loan Debt

Ever been on a date where the other person doesn’t stop talking about their ex? If you’ve had this experience, you can likely relate it to discussing your student loan debt in your relationship. Talking about finances is a necessary evil in a marriage. It can be difficult to discuss finances in a marriage because many people handle finances different based on their personal experiences and how their parents handled them. You might be great at adulting, but if your parents were never open about managing money, you’re probably unsure of how to bring it up. You might even be unsure as to where to start when it comes to managing finances together. Student loans are a big part of many couples’ financial reality. Figuring out how marriage will affect your student loans is an important part of managing your money together.  Here are some main points that we think you should know about marriage and student loan debt.

 

Honesty

The fastest way to create a rift and cause problems in your relationship is to hide information about your finances. According to CreditCards.com, 6% of Americans in a relationship have hidden credit cards or checking/savings accounts from their partner. That total adds up to about 7 million, for perspective, that’s the size of the state of Massachusetts.  It’s not uncommon especially in younger people ages 18-29 to withhold some financial information. It’s when a partner begins to lie about large purchases that a partner should become concerned.

 

People might think that love solves everything, but it’s better to be on the same page and realistic about the situation. If you are mature enough to get married and really want to work together to succeed, you need to face your finances.  As a couple, you need to get over any fears about assessing the financial situation and air everything out. It doesn’t have to be painful but it needs to be an honest outlook. For some couples, this can seem really overwhelming but it doesn’t have to be.

 

Get Tips on How to Talk Finances With Your Partner

 

Get a Plan

Have a conversation about how to best review everything. Discuss each of your finances and then surmise a plan to tackle them. Now in some cases, it may not be this simple depending on your income level, occupation, and level of debt. You may want to meet with a financial counselor first and go over everything together, or sit down as a couple at home and discuss the basics before moving any further. It’s totally up to you both, as a team.

 

Don’t be shy or embarrassed by your financial situation as a couple. There are people who make a living on making sure couples are financially confident and ready to tackle financial goals together. Don’t overlook this benefit of consulting with an outside source about finances—especially if you feel like you don’t know what you’re doing. If you can’t afford an outside counselor check online, you may be surprised at the educational resources available for free. When it comes to self-learning about finances just be careful how you select your resources. As the old saying goes not everything you see online is true!

 

Loan Responsibility

When the person you’ve chosen to marry has student loan debt you can face some challenges. If you haven’t co-signed for a spouse and it’s just their name on the loan, this won’t be something that shows up on your credit report. Beware that even if you did not co-sign your partner’s loan there are instances when you might be responsible for paying the loan. Student loans aren’t that different from other types of loans.

 

For example, if someone passes away, the rest of their loan will likely be forgiven and the spouse would not have to continue making those payments. There are some cases where death will not discharge the remaining debt and the loan company may contact the estate for payment. If your spouse ever lost their income and went into default, the loan companies will look for someone to pay. If your spouse doesn’t have an income, your wages could be garnished. It’s a pretty extreme scenario, but it also happens and is something you should be aware of.

 

If you are choosing to marry someone with student loan debt, it’s important to talk about this. You’ll want to have a plan set up for each of these scenarios. Though they are extreme if you have savings and you pay down your debt responsibly you shouldn’t have any problems.

 

Repayment Plan Adjustments

IBR and other types of repayment plans are often used when paying back student loans. We would caution against using these programs. In some cases, your monthly student loan payment may not be covering the interest accrued that month and therefore your balance will continue to increase.

 

Repayment plans can be based on your household income and family size. When you get married your income and family size may change. If your spouse makes a considerable amount of money, your minimum payments could go up even with your family size going up. If your spouse makes less than you or is not working, your loan payment could go down. It all depends on the details of your financial situation and your loan servicer, but it’s worth noting that this is a possibility.

 

Refinancing

Fairly often we receive request to refinance couple’s student debt together. Many see this as creating a lot less hassle for themselves by creating only one bill.  That’s not always possible, and many experts suggest keeping your loans separate in case your relationship status or financial situation changes in the future. You are not always able to refinance together, either.  Whether or not you can refinance your student loan with your spouse will depend on the loan type and servicer you have. If you’re looking into refinancing, talk to each other about goals. Do you want a lower payment so you can save for a house or do you want to pay loans off sooner so you can live abroad or go to grad school? Again, it’s up to the two of you, but you can’t be on the same page if you don’t talk about it.

 

Don’t stress.

Take a deep breath and know that it’s normal for people to get stressed out talking about money, but it doesn’t have to be that way. No matter how much money you make, you will have to work together as a team to set priorities. This isn’t a blame game. Just talking about finances doesn’t mean that you’re secretly harboring any resentment or grudges. No one is being attacked and no questions are stupid. You both have to agree to create an open dialogue where you both feel good about discussing money and plans. Know that sometimes there are compromises, or one of you might change your personal plans to advance the other. That’s what it means to be a team.

 

Tips for Finding the Perfect Lender to Refinance Your Student Loans

 

NOTICE: Third Party Web Sites
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.

Glossary of Student Loan Refinancing Terms

There are so many terms that borrower’s encounter in the student loan application process, most borrowers may not be exactly sure what each means. If you’re getting ready to apply or just want to know what the documents are talking about, here’s our glossary of common student loan terms that you should know.

 

Adjusted Gross Income (AGI) and Gross Income

Gross income is the total income you earn in a year before deductions for federal or state taxes, credits, and so on. Adjusted gross income is the income you earn in a year which is eligible to be taxed after accounting for deductions. AGI is usually lower than your gross income and is what many institutions use to determine if you can get perks like loan tax benefits or financial aid, grants, etc. The easiest place to find these are on your official tax return.

 

Adverse Action Letter

When you apply for credit, insurance, a loan, or sometimes even employment, and are denied due to something negative on your credit report, the organization inquiring might be required to send you one of these. It explains why you were turned down and it’s important because it gives you a reason to see if something is wrong on your credit report.

 

Amortization

This term describes how the principal is paid over the course of a loan.  Most student loans are fully amortized, meaning that if all payments are made as scheduled over the life of the loan the principal balance will be fully repaid at the maturity date.  Other types of loans, including some types of mortgage loans, have a feature known as a balloon payment.  With a balloon payment, regularly scheduled payments do not fully repay the principal amount borrowed, so when the loan matures the final payment contains a larger, or balloon, payment of all remaining principal.

 

Annual Loan Limit

This is the maximum loan amount you can borrow for an academic year. Loan limits can vary by facts like grade level and loan type.

 

Award Letter

If you received financial aid, expect to see an award letter that explains the different types of aid for which you are eligible. The document will also include information about your loans, grants, or scholarships, and you’ll see a new one each year that you’re in school.

 

Borrower

The person who is responsible for paying back a student loan. You may not be the only one responsible, like if you signed with a cosigner, but the loan is for you and your academic fees and tuition. You’re the borrower.

 

Capitalized Interest

When unpaid interest gets added to the principal balance (increasing your overall balance and future interest), this is called capitalization. This is why it’s important to pay interest whenever possible. Capitalization might happen at the end of a grace period or deferment, or after forbearance, depending on whether it’s a federal or private loan. When a loan is consolidated or if it enters default, capitalization may occur.

 

Cosigner

If needed, borrowers can add a second person who shares responsibility for a student loan. This second person co-signs the loan and becomes partially responsible for repayment in the event that the primary borrower is not able to pay.

 

Consolidation Loan

Consolidation is when a new loan replaces your current student loans. People might do this to make payments easier to manage or to reduce the amount you owe each month or in total. There are lots of things to know about consolidation.

 

Default/Delinquent

A loan is considered delinquent when a scheduled payment is not made in a timely manner.  Delinquency can result in the imposition of late charges, collection calls or letters, and negative information being placed on a credit report.  Default is when the lender determines that the borrower has failed to honor the terms of the loan agreement in such a way that the lender is entitled to declare the entire loan balance due and payable, even if the loan has not yet reached its maturity date.  Serious delinquency is very often the reason for a loan being declared in default, but loan agreements typically provide that certain other events can trigger a default.  Before entering into a loan agreement, always read the loan agreement carefully and understand what can constitute a default under that loan.

 

Deferment

Students can usually postpone loan repayment if they meet certain criteria. This might be a pre-set time limit or can be when someone is in school and not able to make payments. Unsubsidized loans accrue interest while being deferred, but subsidized loans do not accrue interest while in deferment.

 

Disbursement

This is when your school receives funds like financial aid money or student loan funds. The institution then applies it to your bill for tuition and school-related fees. If you consolidate, the disbursement happens when money is sent to pay off your old loans.

 

Discharge

When some or all of your student loan debt is canceled, this is called discharge.

 

Entrance/Exit Interview or Counseling

Schools provide entrance or exit counseling to help students understand important financing topics like how to repay loans and stay in good standing with student loans. This can happen during enrollment as an entrance to the process, and after graduation as part of leaving the school system.

 

Expected Family Contribution (EFC)

This amount is an estimate based on how much money you, your spouse, and/or family can contribute to your tuition for the academic year. It’s calculated with information provided on your FAFSA and helps determine your financial need. Financial need is calculated as the cost of attendance minus your EFC. This determines your eligibility for aid including Stafford loans, Perkins loans, scholarships, and grants.

 

Fixed or Variable Interest Rate

If an interest rate cannot change over time, it is fixed. A variable interest rate can change over the life of the loan.  Variable rates can move up or down based upon changes to an identified index, such a prime rate, a particular U.S. Treasury note, or LIBOR.  LIBOR stands for the London Interbank Offered Rate, and is an index commonly used with student loans.  Some variable rate loans may have a “cap” and/or a “floor.”  A cap is the maximum rate that can be applied to the loan, regardless of changes to the index.  A floor is just the opposite – the minimum rate for the loan regardless of changes to the index.

 

Forbearance

Forbearance is when you can postpone or reduce student loan payments, but interest continues to accrue and increase the total amount you owe.

 

Free Application for Federal Student Aid (FAFSA)

FAFSA is the application a student must complete to apply for any type of federal student aid including loans, grants, or scholarships.

 

Full-Time/Part-Time Enrollment

Whether you are enrolled or not, and your status as part-time or full-time can affect different aspects of student loan financing and repayment. Part-time is usually six credit hours and full-time is twelve, but this can vary.

 

In-School Deferment

While in actively enrolled in school, you might be able to postpone your federal or private student loan payments until you graduate or drop below half time.

 

Loan Forgiveness

When you qualify for certain programs, you may be able to have the final balance of your loans forgiven after a certain period of time. There are specific criteria for eligibility and usually a detailed application process.

 

Master Promissory Note (MPN)

This document states the terms of repayment for your student loans and is the official document proving your commitment to repay the money you borrowed with interest. To receive federal loans, all borrowers must sign an MPN.

 

Principal Balance

The principal balance is the amount of money borrowed under the loan that you currently owe. It doesn’t include interest or fees that are either unpaid or yet to accrue.

 

Repayment Period

This amount of time is what you have to repay your student loans. Standard for Stafford loans is ten years, but this can be extended with reduced repayment plans. The longer you take to pay your loans, usually, the more you end up paying in interest. A repayment plan is the formal agreement you have with a servicer that details how you plan to repay your loans each month.

 

Repayment Terms

These terms represent all of your rights and responsibilities for the student loan, including what you’ll pay for monthly payments. Lenders are required to disclose repayment terms to you before you can commit to borrowing a loan.

 

Right to Cancel

Once an approved application has been accepted by the borrower, the federal Truth in Lending Act requires the lender to provide a Final Truth in Lending disclosure statement.  This final disclosure statement includes a three business day right to cancel, during which time the borrower can change their mind and cancel the loan.  To protect borrowers, the lender cannot disburse the loan proceeds until the right to cancel period has expired.

Servicer

The loan servicer handles your student loan billing like collecting payments and offering customer service between you and the lender.

 

Student Aid Report (SAR)

The SAR is a detailed list of all of the financial and personal information you submitted for your FAFSA, including financial info for your family. Your school receives a copy of this and you should receive one as well.

 

Subsidized and Unsubsidized Loans

While in school and during your grace period, the government pays the interest on your subsidized loans so you don’t have to. Federal loans that are not based on financial need are unsubsidized, meaning you’re responsible for paying the interest that accrues.

 

Top Tips for Finding the Right Student Loan Refinance Lender

Student Loan Refinancing & Your Dating App

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

Our Simplest Guide To Student Loan Refinancing: Part lll

This is the third part of our Simplest Guide to Refinancing. If you’re interested in student loan refinancing and want to know everything there is to know—in simple terms—about refinancing, check out part 1 and part 2. We’ve talked about the benefits of refinancing and process to refinance your student loans, so let’s take a look at what prospective lenders will be reviewing when looking to refinance your student loan debt.

 

Refinancing After Claiming Bankruptcy

 

Bankruptcy is a challenge when it comes to refinancing. Many people may find it challenging to refinance student loans after a bankruptcy for some time. It could even take as long as ten years for a bankruptcy to clear from your credit report entirely. Bankruptcy doesn’t clear student loan debt unless an exception is made, therefore it’s best to look into refinancing before a bankruptcy. If it’s too late for that as an option, that’s okay it may just be harder to qualify for student loan refinancing after bankruptcy. Check with lenders to see what they can offer.

 

Debt-to-Income Ratio

 

Debt-to-income ratio or DTI is the amount of money you owe versus the amount of money you make. This equation gives lenders an idea of what you should be able to afford as far as payments and additional debt amounts.

 

What’s a good DTI? Some sources note 36% or less as the acceptable debt-to-income ratio. It varies based on a lender’s underwriting criteria, but having less debt and more income will qualify you as lower risk for lending. You’ll be considered a lower risk because you have a more disposable income to dedicate to your debts.

 

Credit Score and History

 

Traditionally a “good” credit score is about 680 or higher. Most lenders won’t qualify you for refinancing if your credit score is below 660, but that’s not always the case. If you have a low credit score don’t hesitate to refinance, but be aware that the better your credit score the better rates you’ll receive from lenders.  If you didn’t know, your credit score is impacted by your credit history. So what is your credit history? Well, it’s exactly that, a history of your credit.  Credit history keeps track of how long you’ve had credit and if you’re a responsible lender. Obviously the longer you’ve had credit history the better, but we can’t all have credit as children – unless your parents added you as an authorized user to a credit card when you were born. Even if you don’t have perfect credit and a long credit history, it’s worth checking to see if refinancing might be right for you.

 

Employment

There are a few things to consider regarding employment as you refinance your student loan debt. Lenders will likely look at your income from your job, the length of time you’ve worked there, and job history. If you have a job offer or promotion, you can get a job offer letter to submit that might help the lender understand your employment situation. People with long job history (and one with few gaps), higher income, and good earning potential are less risky for lenders. If you don’t hit all of these criteria, you might still be able to refinance. Without using a cosigner it’s in your best interest as a borrower to be employed to qualify for student loan refinancing.

 

 

Questions to Ask During the Refinancing Process

Home Sales Drop Could It Be Due to Student Debt Crisis?

An eager young couple working together to afford their first home, a young family moving back in with the in-laws, or a recent college grad moving back home after school. These are the stories that have become oh so common in the United States. As the student loan debt crisis in America continues to grow, the homeownership rate has fallen specifically in younger generations. Student loan debt has increased to $1.5 Trillion in 2018 according to the Federal Reserve Bank.  The sales for homes continues to decline hitting its’ lowest number since 2015 according to a study by National Association of Realtors. According to the survey, more than seven in ten student loan borrowers believe that student loan debt has impacted their ability to purchase a home or take a vacation.

 

Many adult children have had to move home and put off their own dreams to pay down education costs like student loan debt. The daydream of one day buying their first home is becoming just that, a dream. Due to the immense amount of debt acquired during college, it just doesn’t seem possible for people to own their own homes. Let’s take a look at factors affecting borrowers and how they are dealing with housing due to student loan debt.

 

The Feds

Is it possible that student loan borrowers have been placed in tough financial situations in part because of the Federal government’s model for the loans they provided during the 90s and 2000s? The Federal Government provided Stafford and Perkins loans to everyone at the same rate regardless of credit history. If you took out a loan with a private borrower, that lender would evaluate your ability to pay that loan back and would provide you with an amount they saw as acceptable. When providing loans to everybody regardless of credit history, the risk to the borrower is increased. Private institutions operate under guidelines and regulations that require they have “some skin in the game” to prevent risky lending.

 

Many borrowers see public service and not-for-profit jobs as a promising opportunity. Borrowers accept jobs in the public and nonprofit sector hoping to have their Federal student loans forgiven, not realizing the stringent requirement for eligibility to the Public Loan Forgiveness Program.  A recent report released on Septembers 19, 2018 by the Federal Student Aid a Department of the U.S. showed that 99% of borrowers have been rejected for the program. News of the rejection has borrowers feeling helpless with a lack of financial literacy.

 

Transparency

Only one in five borrowers understood all the costs including tuition, fees, and housing according to the NAR survey. Borrowers were using loans for tuitions costs and did not fully understand the amount in which they were borrowing. The lack of responsibility on the borrower can be on part due to the lack of financial understanding and education. Financial literacy continues to become a recurring theme throughout the student loan debt crisis. Many borrowers lack the financial know-how for the most efficient ways to pay down student loan debt. The financial knowledge needed to handle debt, and the rising cost of college tuition has not worked to the advantage of student loan debt borrowers. According to the survey, 32% of student loan borrowers had defaulted or entered into forbearance on their student loan debt.

 

Financial Literacy

Forbearance, deferment, Income-Based Repayment, and student loan grace period are commonly used when paying down student loan debt. What most borrowers don’t know is that unless you have a specific type of federal student loan debt, interest is accruing during this time period. The interest that accrues on your loan during these repayment periods can really end up costing you in the long run. In addition to the lack of knowledge on how to handle the debt, borrowers are unaware of opportunities like student loan refinancing.

 

Paying Down Debt & Housing

Now that we understand a bit more about how student loan debt has gotten to where it is now let’s see how borrowers are dealing with the debt and what their housing situations look like.

 

Moving Back Home

We all know at least one or maybe two young people who have moved back in with a family member after graduating from college. It has become fairly common for college graduates to move back home due to the vast amount of debt and “empty nest” syndrome parents often face. What can differ between households is whether the graduate pay rent to the family or friend in which they have moved in with.

 

Renting

According to the National Center for Education Statistics student loan debt has grown from 5% to 30% of all household debt. Since 2008 the cost of college has risen. This increase in debt has caused an increase in renting. Equifax surveyed millennial renters asking why they didn’t buy a home and 55.7% of respondents listed “student loan debt/not enough money saved” as their reason for renting.  If a student loan debt holder can afford a mortgage payment typically they cannot save for the down payment that is required.

 

Potential homebuyers are having trouble finding homes they can afford according to CNBC. Due to this difficulty, many people are finding themselves renting for longer periods than they would have hoped. National apartment occupancy sits at 95% as of 2017.

 

The Housing Market

As mortgage rates continue to increase so too, does the cost of homes. Both these factors continue to cause a drop in the sales. For example, sales of single-family homes, co-ops, and condominiums have dropped 3.4% from the prior month. Houses have become unaffordable and those with student loan debt cannot find the additional savings for the down payment needed. This drop in home sales could have a strong effect on the market.

 

Looking Forward

 

Employer Benefit Programs

First-time homebuyers should not feel discouraged as there are still many options available. Employers have been stepping up to help employees who are carrying student loan debt by offering benefit student loan debt assistance programs. These programs help borrowers receive resources that they need to pay down debt faster. In addition, the programs give employers the ability to share contributions towards the student loan debt of their employees.

 

Student Loan Refinancing

Borrowers with above 650 credit score and steady income may qualify to refinance their student loan debt. Refinancing student loan debt would allow borrowers to select their repayment terms and could offer a lower interest rate. A lower interest rate on student loans could save thousands over the life of the loan.

 

Education

Secondary institutions and lenders need to better educate borrowers on terms and best practices on paying down debt.  The more resources that can be provided to borrowers the better off that borrower is. In addition, borrowers should not count on qualifying for the Public Student Loan Forgiveness program. Financial literacy also should be addressed to students at young ages. The more we can educate our youth of responsible lending the better off the United States economy can be.

 

Learn More About the State of Student Loan Debt in America Today

 

 

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The State of Student Loan Debt in America Today

Education is an investment in one’s future. It opens doors to greater possibilities. It empowers people to reach their full potential. But for many, college has become an anchor instead of a sail. Crushing student loan debt can hinder a graduate’s ability to focus on the future. Some must choose careers based on salary instead of passion, just so they can handle loan payments. The constant need to earn more money stunts employee loyalty and justifies job-hopping. Even after refinancing student loans, debt still delays graduates from buying homes and starting families.

 

It’s not just an unfortunate few saddled with student debt. Consider the following statistics:

 

  • More than 44 million Americans currently carry student loan debt.
  • The total combined debt is nearly $1.5 trillion. That’s more than the total amount of credit card debt owed.
  • Student loan debt is equivalent to 7.6 percent of the U.S. GDP in 2017. To put it another way, retiring the full amount of student loan debt would take 7.6 percent of the value all the goods and services generated in the U.S. economy for a full year.
  • The average debtor owes $39,400 in student loans. That’s equal to 70 percent of the median household income in the United States, which is $56,516, according to the 2015 U.S. Census.
  • On average, student debt is far greater than the annual salary of a new college graduate. According to the latest Bureau of Labor Statistics, the average American ages 20 to 24 earns just over $28,000 annually. It’s slightly better — $38,400 — for Americans between the ages of 25 and 34. However, that’s still less than the average overall student loan debt.
  • According to a 2017 PricewaterhouseCoopers survey, 40 percent of millennial employees have a student loan. Over 80 percent of them say student loans have a moderate or significant impact on their ability to meet financial goals.

 

New doctors carry an extreme amount of medical school student loan debt. About 75 percent of new doctors in the U.S. graduated with debt in 2017. The average amount is now close to $190,000.

 

This explains why New York University will now grant all medical students free tuition. That is approximately $55,000 a year per student.

 

“We thought it was a moral imperative because it’s very difficult for medical students to incur the debt burden of medical school, as well as the additional time burden of training,” Dr. Robert Grossman, dean of NYU School of Medicine, told ABC News.

 

According to the report, student loan debt can “scare away” students from a career in medicine. It may also prevent graduates from pursuing a lower-paying specialty like pediatrics.

 

Clearly, there is no quick fix for student loan debt. However, several public and private programs can ease the burden. These initiatives continue to grow as more employers recognize the value of offering financial benefits, such as student loan repayment assistance.

 

Common student loan assistance programs include:

 

  • The Public Service Loan Forgiveness Program is a federal program designed to forgive student loan debt for employees of certain public and nonprofit jobs.
  • The Federal Perkins Loan Cancellation and Discharge forgives a certain percentage of student loan debt after every year of service. There are a number of ways to qualify for this program.
  • Both the Pay-As-You-Earn (PAYE) and the Income-Based Repayment (IBR) programs set repayment cap amounts based on income and family size. They also forgive remaining debt after a set number of years of qualifying payments.
  • Student loan forgiveness programs designed specific careers such as teachers, nurses, and lawyers.

 

Public programs may be a great fit for some. But for others, they may actually end up costing more over time. When considering a deferment or forbearance program, make sure you are not accruing additional interest. If so, this will then be capitalized and added to your original principal balance. Programs like IBR can be misleading. They can set graduates up to make payments only towards the interest rate accruing that month. This means they never actually apply to the principal balance of the loan. And it keeps the loan balance the same over time even though payments have been made towards the loan.

 

Before choosing a program, graduates should crunch the short-term and long-term numbers. It’s easy to get caught up in a program’s immediate impact. After all, you may only need a little breathing room in your budget. However, it’s this lack of knowledge surrounding these programs that is fueling the student loan debt crisis.

 

In response, more private employers are adding student loan and tuition assistance programs to their benefits packages.

 

“Employer-sponsored third-party student loan repayment assistance programs are projected to grow quickly in the future,” according to a Consumer Financial Protection Bureau (CFPB) report on student loan repayment assistance programs.

 

According to a January 2017 WorldatWork survey:

  • 4 percent of employers surveyed offer student loan debt repayment assistance.
  • 11 percent offer employee scholarships and student aid.
  • 23 percent have scholarships available for employees’ children.
  • 14 percent offer college savings plans as part of their benefits package.
  • 87 percent offer tuition reimbursement to current employees for career development opportunities.

 

A similar employee benefits survey by the Society of Human Resource Management showed that the number of employers offering student loan repayment programs increased from 3 percent in 2015 to 4 percent in 2017.

 

In general, the larger the company, the more likely it is to offer employees student aid benefits. Companies can use these programs as a recruiting tool to attract recent graduates.

 

Still, experts agree there’s much more that needs to be done.

 

Summarized the CFPB: “Recognizing that significant student debt can have a domino effect on consumers’ financial lives and overall financial wellness, reports suggest an increased interest by both large and small employers in exploring benefits to help their employees pay down student debt or help manage their employees’ student debt stress.” Most of these initiatives are steps in the right direction. However, there is still a long road to recovery ahead for those affected by the student loan debt crisis.

 

This guest post was authored by Colin Nabity. Colin Nabity is the Chief Executive Officer of LeverageRx, a digital lending and insurance company for healthcare professionals. Through software technology, LeverageRx helps healthcare professionals find better rates on disability insurance, medical malpractice insurance, student loan refinancing and mortgage loans.

 

9 Signs It’s Time to Refinance Student Loan Debt

9 Signs It’s Time to Refinance Student Loan Debt

When is it time to swipe right on a refinance of student loan debt? It can be a tough question because everyone’s situation is so unique, and your goals or your motivation might be totally different from someone else. That’s why we’ve put together a simple explanation of signs that refinancing might be a good option for you. Here are nine signs it might be time to refinance student loan debt:

 

You have a good credit score.

If you don’t have a good credit score, now is probably not the time to try to refinance. You will not get as favorable of interest rates and you might even be turned down outright. Check your credit score and go over your credit report asap. If there’s anything that needs to be fixed, do it. If your score could be better or if your credit history isn’t very long, look into ways to improve it. You can get your score up and clean up your report, but it takes work. That needs to be in order before you choose to refinance student loan debt.

 

You’re up to date on your loan payments.

Have you been making your payments no problem? Great! If not, now is probably not the time to refinance. You might need a new payment plan instead of refinancing, but you will not look like as good of a borrower if you are behind on payments or have had trouble paying. Get up to date and make your payments on time for a while before trying to refinance. If you’re having trouble coming up with the money, be sure to reach out to your servicer to see what your options are.

 

You are employed with a steady income.

If you are unemployed or your income is spotty, refinancing will likely be difficult or impossible. The best time to refinance is when you land a good main gig that has a consistent paycheck. You’ll have to report your income, so you may want to postpone your refinancing now if you aren’t already making a decent income. If you are self-employed, try giving yourself a few months of solid income before proceeding.

 

You have a good debt-income ratio.

This one can be kind of a bummer because a lot of millennials are saddled with a fair amount of student loan debt (and maybe other kinds of debt) along with being underemployed. To get a hold on some of this debt, you might be looking to refinance. The problem is rates may not be as favorable or you may not qualify—if your debt to income ratio is too high. Look at options for gaining more income or reducing some debts you currently have, like cutting out credit cards and paying down those other debts.

 

You are not planning on student loan forgiveness for public service work.

If you’re in public service and know you’ll qualify for loan forgiveness after the ten-year mark, refinancing can interrupt that and disqualify you for loan forgiveness. If you’re counting on loan forgiveness we’d recommend you don’t refinance your loan with a private vendor, but be sure to verify that you qualify for loan forgiveness.

 

You know which loans to refinance and why.

If you’re not sure about which loans you want to refinance and why check out our guide to student loan refinancing. We help explain why you might not want to refinance federal loans, and which private loans are best to be refinanced.

 

Loan benefits don’t apply to your situation.

If you are not going to qualify for loan forgiveness or if you don’t need benefits like income-based repayment plan options that you’re currently taking advantage of, it might be cool to refinance. Know what special plans you’re using with your current lender before you refinance because you don’t want to lose those in the process.

 

You could save a boatload on interest or loan terms.

People usually think about refinancing when they are looking at a super long-term payment plan that they want to shorten or when they realize that their interest rate is high and they might be able to do better. If you aren’t sure how good your interest rate is, ask a friend or Google current rates. Start comparing. You’ll get an idea. And that will help you understand whether you can keep the same payment and shorten the length of time you pay, too, because this is also tied to interest rates.

 

You know how to find a good lender.

Even if you don’t know how to find a good lender, you can figure it out! We encourage you to reach out and get in touch. With ELFI, applicants get their own Personal Loan Advisor who will stick with you throughout the application and setup if you decide to refinance, making the process simple and straightforward.

 

What To Know Before Refinancing Student Loans

Women and Student Loan Debt

The cost of college has been on a slow increase since about 1976, and it’s no wonder the cost of student loan debt has too, seen a hike. According to AAUW the cost of college has increased 148% since then. Student loan debt has been estimated to total around $1.5 Trillion according to the Federal Reserve. Women prove to hold more than half of student loan debt. Let’s take a look at some factors that could be causing women to keep more student loan debt than men.

Women and Student Loan Debt

Women Less Likely to Refinance Student Loans

Refinancing student loans can help to achieve a lower interest rate and consolidate multiple loans. Refinancing also allows borrowers to change the repayment period, so they are paying less over the life of the loan. According to Student Loan Hero research, of the women who have heard about student loan refinancing, only 6% have proceeded to refinance their student loans. By not refinancing, women are subject to long payment periods that could end up costing them more over time.

 

Lack of Opportunity

Women are shown to have less executive or leadership roles in companies when compared to men. Research by Pew Research Center shows that woman hold only 10% of top executive positions. That leaves 90% of the remaining leadership positions for men. With mostly men in high ranking positions, it seems reasonable to assume that men, in general, would be making larger salaries than women due to a higher percentage of men in executive positions.

 

Student Loan Refinance Head Barbara Thomas’ Advice to Those Caught in the Gender Gap

 

Missed Work Hours

A possible reason for women holding more student loan debt is that they may be getting paid less because of their time off. Women have traditionally held the majority of the parenting responsibility. If a child was sick or ill it was usually the female who would stay home with the child or that is what traditional gender roles would assume. Pew Research has shown that parenting can hurt your earnings. Time away from the office dealing with children could be not only a reason for less pay but a lack of ability to pay student loan debt down faster.

 

Women Get Paid Less

The pay gap between men and women varies based on location, but women still make less than men. Can you believe it in 2018 women are still fighting for their right to be equal? According to information provided by the US Census Bureau, women earn 19.5% less than their male counterparts. In some states like Louisiana, the gender pay gap is a whopping 30%. In states like New York, it is only 11%.

 

Lack of Financial Literacy

According to CNBC women are shown to be less financially literate than men. If women make poor choices with their money, it could end up costing them in the long run, causing women to have more substantial student loan debt than men. Women are two times more likely to see their student loan debt as “unmanageable” according to Student Loan Hero.

 

Refinancing student loans is a great option for those with student loan debt. If you qualify for refinancing you can change repayment dates and possibly get a lower interest rate. An added benefit for those with multiple loans is that if you choose to refinance all your loans you’ll only have to make one payment a month instead of multiple payments. Refinancing your student loans can help to eliminate student loan debt faster depending on the repayment terms you select. Let’s start lowering the number of men and women with student loan debt!

 

Click to View Our Student Loan Refinancing Guide