×

Pay Down Student Loan Debt or Invest In a Traditional 401(k)?

Student loan debt in the United States has amounted to $1.5 trillion according to the Federal Reserve. This large student loan debt burden has affected many young people who are looking to start families and create a life for themselves. Despite this tough obstacle, many young people still have excess savings and need to determine what to do with these savings. Should they take their savings and invest in a traditional 401(k) or use that savings to pay down their student loan debt? We’re going to share different situations all spanning 10 years that involve paying down student loan debt and investing in a traditional 401(k) plan.

 

 

Let’s say you have a taxable income of $150,000 and file taxes jointly with a spouse. Under the new 2018 tax brackets, your effective federal tax rate is 16.59%.  Let’s also assume you have $70,000 of student loan debt with 10 years left at a 7% interest rate. Your monthly student loan payment would be about $812.76 assuming you’re making the same payment amount every month.  What should you do? Pay down the student loan or invest in a traditional 401(k) account?

 

 

Income: $150,000

Effective Tax Rate: 16.59%

Student Loan Debt: $70,000

Monthly Payment: $812.76

Term: 10 years

Interest Rate: 7%

 

Scenario 1 – Paying Down Debt Student Loans Then Investing

Let’s start off by taking a look at how you can pay this debt down faster. Did you know that if you pay an extra $100 a month in addition to your regular student loan monthly payment, you’ll save $4,464.13 in interest paid? Not only will you save money by paying extra every month, but you’ll cut down the overall repayment period by a year and a half. Yes, you’ll be debt-free a year and a half earlier than you thought!

 

$812.76 + $100 = $912.76 Monthly Payment

 

After being debt free sooner than expected, you may decide to start investing in your 401(k). If you put all of the money you were paying from your student loan into your 401(k), you’d contribute $1,094.31 monthly.

 

You may be wondering how you can contribute more money towards your 401(k) than your student loan payment. The answer lies in taxes.

 

Student loan payments are made with post-tax income. 401(k) contributions are made with pre-tax income. Since a traditional 401(k) account uses pre-tax income, you are able to contribute more towards your 401(k) than you would have your student loan debt with the same income. Though you don’t pay taxes on 401(k) contributions, ordinary income tax will be applied on 401(k) distributions.

 

$912.76 / (1-16.59%) = $1.094.31 Monthly Contribution

 

After a year and half of contributing $1,094.31 per month, compounded monthly, at an assumed 7% rate of return, you would have $20,826.09. The investment amount of $20,826.09 combined with the student loan interest savings of $4,464.13 would give you a total 10-year net value of $25,290.23.

 

Scenario 2 – Investing While Paying Down Student Loan Debt

 

If you have a higher priority of saving for retirement than paying off your student loan debt, you may want a different option. Let’s see what would happen if you decided to put that extra $100 a month into a tax-deferred 401(k) account. The $100 would be contributed to your 401(k) account instead of your student loan debt balance, but you would continue to make monthly student loan debt payments. Due to the pre-tax nature of a 401(k), your contribution of $100 post-tax would become $119.89 pre-tax.

 

$100 / (1-16.59%) = $119.89 Monthly Contribution

 

With an assumed 7% rate of return, compounded monthly, on your 401(k), you will have approximately $20,872.19 in your 401(k) after 10 years.

 

Scenario 3 – Employer Contributions 401(k)

 

Some employers will match your 401(k) contributions up to a certain percentage of your income. This could be a real game-changer. Turning down your employer’s 401(k) match is like throwing away free money. If you have student loan debt, but your employer offers a match, consider contributing to receive the maximum employer match. If you contribute $119.89 a month with an employer match while making your normal student loan payments, your money can really grow.  If your employer matches the 401(k) contribution dollar for dollar, you will double your investment of $20,872.19 from Scenario 2 to $41,744.37 in your 401(k) account after 10 years.

 

Contributions to a traditional 401(k) are made prior to your income being taxed. The withdrawals on a traditional 401(k) are taxed. The tax rate that is applied to your withdrawals depends on your tax bracket in retirement.  As the average person’s career develops, they typically continue to increase their salary and move into a higher tax bracket. Upon retirement, they will see a decrease in income and move to a lower tax bracket. This means your 401(k) withdrawals could be taxed in a lower tax bracket if done while in retirement, instead of in your working years. Note that this will only be the case if your retirement income is less than your working income.

 

 

Scenario 1 – Paying Down Then Investing

Scenario 2 – Investing While Paying Down Debt

Scenario 3 – Employer Contribution 401k

 

As you can see from the chart above, investing while paying down student loan debt or paying down debt than investing produces almost the same total net value. One debt pays down and investment strategy might perform better than the other depending on the return in the 401(k) account. It’s important to keep in mind that the returns on a 401(k) account are never guaranteed

 

The real deciding factor on whether to invest or pay down your student loan debt will be if an employer offers a 401(k) match. Matching contributions from your employer will make investing significantly more attractive than paying down debt. If an employer match to your 401(k) is available, it’s wise to take advantage of it.

 

Your comfort level with your student loan debt can be a large factor in your decision to invest in a traditional 401(k) account or to pay down debt. Knowing whether you are more interested in being debt free or being prepared for retirement can help you make a decision. Let’s look at how student loan refinancing can help you amplify your student loan debt pay down and investment strategy.

 

In Scenarios 1, 2, and 3, the big question was whether you should use the additional $100 a month to pay down student loan debt or invest in a 401(k). What if you wanted to spend that $100 a month instead? Is it possible to find a way to save on student loan debt while spending that extra $100 a month? You’re in luck! This can be done with student loan refinancing.

 

Scenario 4 – Refinancing Student Loan Debt

By refinancing your student loan debt, you should be able to decrease the high-interest rate of your student loan. In addition, you should be able to save money over the life of the loan and in some cases monthly.

 

The total interest you would have to pay on your student loans of $70,000 at 7% interest over 10 years is $27,531.12. If you qualify to refinance your student loan debt to a 5% interest rate, the total interest you would pay is $19,095.03. This would mean that refinancing your student loans would be saving you $8,436.09 in interest over the life of the loan or $70.30 a month.  When comparing your new 5% interest rate to your previous interest rate of 7%, not only would you be saving over the life of the loan, but reducing your monthly payment!

 

$8,436.09 / 120 = $70.30 Monthly Interest Savings

 

Learn More About Student Loan Refinancing

 

 

Scenario 5 – Refinancing and Paying Down Debt Then Investing

 

Now, what happens if you refinance your student loan debt, pay down the debt, and then start investing? Refinancing your student loan debt will cut your interest rate, saving you $70.30 a month, making your monthly student loan payment now $742.46 instead of $812.76 per month. By taking the additional $100 a month and the $70.30 in student loan savings from refinancing and applying them to your monthly student loan payment, you will be debt free two years and three months sooner than expected. Two years and three months are earlier compared to the one and a half years from Scenario 1. Just a reminder, in Scenario 1, there an additional $100 a month put towards your student loan debt. With refinancing and making the same monthly payment as Scenario 1, you will save $13,017.87 in interest over your original loan.

 

$742.46 + $70.30 + $100 = $912.76 Monthly Payment

 

Now that you’re debt free, you can use the money that would have been used for your student loan payment to contribute to your 401(k). Since 401(k) contributions are done with pre-tax income, you will be able to contribute a pre-tax amount of $912.76, which is $1094.31.

 

$912.76 / (1-16.59%) = $1.094.31 Monthly Contribution

 

After two years and three months of contributing $1,094.31 per month, compounded monthly, at an assumed 7% rate of return, you would have $32,085.89. The investment amount of $32,085.09 combined with the student loan interest savings of $13,017.87 would give you a total 10-year net value of $45,103.76.

 

Scenario 6 – Refinancing and Investing While Paying Down Debt

 

Now let’s try refinancing while you simultaneously pay down debt and invest. In this scenario, you will cut down the interest rate on your student loan debt from 7% to 5% by refinancing. You’ll be contributing the pre-tax amount of the extra $100 a month and $70.30 a month in interest savings towards your 401(k). You will end up contributing a total of $204.17 a month to your 401(k) account.

 

($100 + $70.30) / (1-16.59%) = $204.17 Monthly Contribution

 

With an assumed 7% rate of return, compounded monthly, you will have approximately $35,544.87 in your 401(k) after 10 years. Combined with the interest savings of $8,436.09, you will have a total net value of $43,980.96.

 

 

 

Scenario 1 – Paying Down Then Investing

Scenario 2 – Investing While Paying Down Debt

Scenario 4 – Refinancing Student Loan Debt

Scenario 5 – Refinancing and Paying Down Debt Then Investing

Scenario 6 – Refinancing and Investing While Paying Down Debt

 

As you can see from the chart above, just from refinancing your student loan debt, you can save money and increase your total net value. If you take it one step further and supplement your debt pay down and investment strategy with student loan refinancing, you would approximately double your total net value! By taking advantage of student loan refinancing, you will be able to supercharge your debt pay down and investment strategy. For those who are just trying to save money on student loans or have more money to invest in their 401(k), student loan refinancing is the way to go.

 

Check Out Our Guide to Student Loan Refinancing

 

NOTICE: Education Loan Finance by SouthEast Bank is not authorized to provide tax advice or financial advice. If you need tax advice or financial advice contacts a professional. All statements regarding 401(k) contributions assume that you have a 401(k) plan and that you are able to contribute those amounts without contributing more than the current federal law limits.

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.

 

Benefits and Savings of Completing College Early

People usually think of completing college in four years as a typical timeline. In reality, many undergrads find that working in the summer or studying abroad can add extra time to getting their degree. According to the NY Times, only 19% of college graduates at public universities finish a Bachelor’s Degree in four years. Most experts use the timeline of six years to complete a Bachelor’s and three years to complete an Associate’s Degree. There’s nothing wrong with taking more time, but there are advantages to getting college completed early. Here are some reasons you may want to take an extra class each semester or stay on campus for summer classes to finish early.

 

Less time in school means less money spent on college.

Think about the extra fees you pay each semester. From parking permits, recreation center fees, and fees charged per department. The longer that you’re in school for, the more you will end up paying in fees. Taking more classes at once won’t save you on overall tuition necessarily. Taking more classes will lower the amount you’re paying for being in school, over time. Plus, tuition has the tendency to go up over time, and rarely goes down. Therefore, taking more classes now could save you on tuition in the long run since you’ll avoid rate hikes.

 

The cost of college will depend on the type of college you attend. The cost difference between public school and private schools may be surprising. When looking at the cost of public schools whether a college is in-state or out-of-state from your current residence will also play a role in the cost. We broke down the cost of college into three separate categories public in-state, public out-of-state or (public OOS) as can be seen below, and private. We calculated the costs for a 4-year completion, 5-year completion, and 6-year completion. These costs were based on averages provided by Value Penguin.

 

 

The below graph shows what the cost for 6 years of school will ultimately cost the borrower at each of these three types of colleges. The cost of a private college for six years equates to the cost of a Rolls Royce Wraith. Just to put that in perspective for you, Gwen Stefani the previous singer of the band No Doubt owns this car. It’s important to understand if something like studying abroad will set you back a semester or not. Yes, studying abroad is a great experience, but are you prepared to tackle the debt that may come along with delaying your academic career?

6-Year Costs of College

Public In-State School – $172,277.15

Public Out-Of-State School – $266,177.15

Private School – $325,937.15

 

 

The overall cost of college can seem overwhelming, but it’s important to understand what you’re spending by staying in school longer. It will help you to understand if the cost of an education is worth the field that you are studying to enter into. In addition, the college that you choose will have an impact on what you have to pay to achieve that education. For example, if it takes you five years to graduate there could be a price difference of about $128,050.00. The cost of college really is impacted by the type of school you choose in addition to the amount of time you spend there.

 

5-Year Costs of College

Public In-State School – $142,255.75

Public Out-Of-State School – $220,505.75

Private School – $270,305.75

 

It’s tough these days to graduate from college in 4 years, but it’s still doable. If you work closely with your counselor and study hard you’ll be on the right track. If you need summer classes they are typically available as well.

 

4-Year Costs of College

Public In-State School – $112,799.70

Public Out-Of-State School – $175,399.70

Private School – $215,239.70

 

If you enter college determined and know what you want to do, it will save you a decent amount of money. The difference between graduating in four and six years can be extreme in some cases. Below is an illustration of the cost difference between four and six years. Notice the cost difference specifically between a public out-of-state school and a private school.

 

Cost Difference Between 4 Years & 6 Years

Public In-State School – $59,477.45

Public Out-Of-State School – $90,777.45

Private School – $110,697.45

 

One of the most important parts of preparing for college is understanding how you will pay for it, how long you’ll be in school for, and if you can graduate early. If you have the ability to graduate early you should certainly consider it. At the same time, it’s important that you don’t overwhelm yourself.

 

Get to work, work, work, work, work.

It’s hard to apply for a job and commit to a typical work schedule when you’re still in school. If you can work throughout school and put contributions to your loans that is a great thing to do. If you can’t work at a traditional job, that’s okay too, but be sure that you are doing all the work you can to finish early. Completing your degree earlier can give you the ability to start looking for a job in your career field earlier. That extra year or two of working at a professional career job will put you at an advantage.

 

Bring home the (much better) bacon.

With your degree completed, it’s likely that you’ll qualify for higher-paying positions in your field. If you already have a job that you like and want to stay with the same company, chances are you’ll be worth more once you’ve got that degree in your hand.

 

Find more time.

When you’re done with school, you’ll have more time to work, build your resume, or balance commitments with life. Lots of students experience burnout, especially when they’re working while going to school, or taking a heavy study load. Add things like internships and clubs to that list and it just sounds overwhelming. Post-college, you will likely have more time to balance working, taking care of yourself, and pursuing other hobbies. Working full-time is still a commitment, but compared to working, taking 18 credits, and being in a student org. graduating might feel like a relief to your schedule.

 

Spend less money on college living.

It might make sense to have a meal plan or live on campus while you’re in school. Be aware those things are notoriously more expensive than how the rest of your community probably lives. By getting a shared apartment with friends or other young professionals, meal planning each week and doing your own shopping – you can usually save money.

 

Have more control over your schedule.

You know how it goes with classes. Sometimes you try to fit all of your classes into two days so you can have more free time. Try using your free time to work or study on days off. Coming across a required class that doesn’t pair with your schedule can ruin a lot of possibilities. By graduating, you’ll have fewer of those college-imposed restrictions on your time.

 

Get on with adulting!

Sure, many of us joke about the downsides of adulting, but it’s also nice to pick where you live and what you do. You can make choices like how to budget and what your financial and personal goals are. If you’re in a relationship, you can decide together what the next chapter holds or start making bigger plans together. If you’re unattached, you can go anywhere and don’t have to worry about credits transferring. The world is your oyster!

 

There are some instances where it absolutely makes sense to slow down your progress toward a degree. It’s okay if you need to take more than the typical two- or four-year (or even three- or six-year) track. Working parents or non-traditional students may find they can comfortably handle a half-time load with their other commitments. A full-time course schedule may be impossible to maintain for them. If you’re already working in a job that you like and are getting reimbursed for school, going at a slower pace could actually put you at a tax advantage. Not to mention some people take fewer classes at a time so they can pay more out of pocket and take out less in student loans. You should choose what works for you and helps you progress toward the ultimate goal of getting the education to support your dreams. Just make sure you have a plan that works for you and keeps you motivated to graduate!

 

Here’s How to Cut A Budget

 

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.

 

 

What you Need to Know About College Scholarships: Part I

Paying for College? Here’s Where to Find College Scholarships

 

So you’re going to college. That’s great! But now you need to find a way to pay for it. Lots of people have a successful college career by borrowing student loans for college, but scholarships for college can help lessen the amount you need to borrow. Here are some things you need to know about college scholarships and how to find them.

 

When should I search for college scholarships?

 

One of the most important things to know about searching for scholarships for college is that you should start early to make sure you’re meeting deadlines. The sooner you start looking for aid, the better. You want to be top of the pile when it comes time to apply, and you don’t want to miss out because you were late on a deadline. If you are late to apply to a scholarship deadline, chances are they won’t accept your submission.

 

If you know what degree you want and where you’ll be going to school, it cuts out the guesswork. Your degree and school will heavily impact how much you’ll pay for college.  Any amount of schooling that can be paid for by a scholarship will be the best option. If you’re earlier in the process, here are some helpful figures on the average cost:

 

What does it cost to go to school?

 

School costs vary widely depending on multiple factors. Factors that impact schools costs include your degree, choice of school, and the type of field you’re going into. You may also be able to work while going to school, which can lower the cost.

 

Degree Type

Average Cost – Public Average Cost – Private
Associate’s Degree – Two Year[1] $3,570 $14,587
Bachelor’s Degree – Four Year[2] $102,352 $250,576–$341,184

(For-profit vs. Not-for-profit)

Master’s Degree[3] From $30,000 to $120,000, depending on the program and school
Doctorate[4] From $15,000 to $50,000, depending on the program and school

 

 

What should I look for in a college scholarship?

 

Scholarship qualifications can vary significantly based on the person or organization that created it. You might have to keep up a religious commitment or affiliation, meet performance requirements, or prove you are completing projects or work. Most commonly scholarships require that you need to maintain a certain grade point average and enrollment status. Don’t be surprised if other stipulations apply to a scholarship. It’s important to know the details when considering if you should apply or accept scholarships for college.

Secondly, you also need to look into how you are allowed to use the funds. Some scholarships cover strictly academic fees. Others scholarships may be used for room and board or general living expenses. Know the restrictions on funds before you accept any financial aid. The last thing you want to do is risk losing the money or having to pay it back.

Finally, be sure to find out what the worst case scenario might be. If you change programs or don’t achieve the grade you needed, what happens? It’s nothing that should scare you away from scholarships, but you need to know. Knowing if you’ll be on the hook later if something goes wrong is important.

 

Federal Scholarships

The U.S. Department of Education has lots of tips on finding federal student aid and federal scholarships. Be sure you start your scholarship search for college at studentaid.ed.gov. In order to avoid taking out student loans for college, checking with government programs is a must. An added bonus is that the details and requirements are pretty clearly laid out. Using the U.S. Department of Education website is usually a quick search that’s easier to do, so we’d recommend starting your scholarship search there.

 

College Scholarship Categories

There are lots of different categories of scholarships. Here are some of the main ones you might qualify for. Narrowing down your search to a category can really help you focus on what applies to you and make your search more effective.

 

Scholarships for Academic Excellence (or even average performance)

As you can imagine, the top academic scholarships are highly competitive and only apply to the tip-top of high-performing students. Very few of us fall into that category. The good news is that whether you’re an ace or have more typical grades, you can still search for scholarships based on the level you’ve achieved in school and see if you qualify.

 

Athletic Scholarships

Are you good at a sport or activity? Search for those scholarships! From chess to volleyball to football and soccer, there are scholarships for lots of different types of athletes.

 

Legacy Scholarships

Your parents might have a connection to a university or organization that offers scholarships. Ask around the family and see if you can make that connection.

 

Military Scholarships

Most people are aware that the military offers money for college. There are lots of options from military reserves up to enlisting for a few years of full-time military membership. Check out this list of military scholarships and aid for active duty service members and veterans.

 

Scholarships for Parents

Single parents, working parents, and young parents are just some of the people who might qualify for this type of scholarship. Lots of organizations and schools want to promote education for all members of the community, and sending parents to school (or back to school) might make you their prime applicant.

 

Scholarships for Minorities

Scholarships for minorities often come from community organizations, colleges, and institutions, or even national and global groups that want to promote education for your ethnic or cultural group. Search this type of scholarships for college to learn more.

 

Scholarships for Women

Similarly to scholarships for minorities and parents, women often face barriers to attending school at higher rates than men. Scholarships for women offer extra help to make sure educating women is a priority.

 

Creative or Writing Scholarships

Essay contests, portfolio reviews, and performance arts-based scholarships exist for students in the arts. They often vary based on the school and focus of study, but there are many available. Don’t pass up searching for scholarships if you’re going into the arts or humanities, or even if you are a good essay writer and want to search for writing opportunities that might help you get a scholarship for college.

 

Community Service Scholarships

Community service covers a huge array of possibilities. If you’re passionate about helping your community, see if you can get involved with some projects, start one of your own, or search community service scholarships now to see what you could be doing that would make you eligible.

 

Unusual Scholarships

From scholarships for tall women to people with red hair to fans of HAM radio, there are all kinds of unusual scholarships for college out there. Check out lists like this one at Scholarships.com to see what you might qualify for that you never would have thought of!

 

Look for Upcoming Parts to This Guide

If you’re looking for scholarships for college because you want to save on your student loans for college, we’ll be posting more information soon to help guide you!

 

Jobs to Reduce Student Loans for College

 

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.

 

 

[1] https://www.studentdebtrelief.us/news/average-cost-of-college-2018/

[2] https://www.campusexplorer.com/college-advice-tips/E66537B4/Costs-Of-A-Bachelor-s-Degree-Program/

[3] https://www.bestmastersdegrees.com/best-masters-degrees-faq/how-much-does-a-masters-degree-cost

[4] https://study.com/articles/How_Much_Does_a_Doctorate_Degree_Cost.html

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.

Reduce Student Loans for College with These Jobs for Students

It’s not practical to go to college and not have a job. With a number of non-traditional students commuting or even raising a family during school years, being employed is a must. Plus, even having a part-time job not related to your desired field can still prove that you have the skills it takes to manage your time, work as part of a team, and be reliable. Never underestimate the importance of these types of skills on your resume!

 

With most students taking out student loans or aid, finding a college job can mean that you can reduce your student loans for college and pay some tuition or expenses with your current income. That said, there are some jobs for college students that are better than others. Here’s our take on what are the top jobs for college students and why.

 

Nanny

Nannying is a serious skill that not everyone has. If you’re great with kids and can find a gig to match your availability, being a nanny means you’ll get paid well to spend your time helping a family raise cool kids into stellar adults. No longer the $3/hour that you got paid to watch neighborhood kids back in the day, the average nanny rate is $12–$13/hour. You could even get paid more if you have additional skills like foreign languages or child development knowledge. Nanny jobs can be a really great asset to students studying to be teachers. Nannying could be a great introduction to what you’ll be studying in school.

 

Office Admin

Working in an office is usually not very glamorous, but there’s a reason why so many college students look for basic administrative work. Office environments can be nuanced and require you to learn certain types of etiquette on top of professional dress and demeanor. By working part-time in an office around your school schedule, you’ll learn things like phone skills, how to operate standard office equipment, basic computer skills (that you might already have, but it’s still nice to reinforce), and you’ll make connections with other professionals who can give you a reference later. Depending on the type of office you’re working in you may have the ability to gain some additional career skills. If your regular tasks are completed it’s likely you’ll get to learn some additional skills that could come in extra useful in the long-run.

 

Hospitality or Community Outreach

Anything in outreach or hospitality that exposes you to lots of people in your community is a great opportunity for a college student. Being the happy face of an organization means that you will build great people skills like patience and customer service. In addition, it’ll give you a chance to get to know other people or places you encounter. Did we mention networking? Do you best to network with as many people as possible. You never know when the relationships you’ve made will come in useful across your career and study journey.

 

 

Health Unit Clerk

Helping out in a medical facility or institution is a top job for college students because you can usually land a good rate of pay during hours that fall outside when your classes are. Whether it’s nights, weekends, or after-hours, being an orderly requires you to use empathy and care for people who need help caring for themselves. It’s not for everyone, but if you’re passionate about helping people and want the simplicity of wearing scrubs every day while making about $12/hour, this might be your best bet. Of course, being a health unit clerk is a great first step for anyone looking to further their career in social work or a medical field.

 

Bank Teller

Some people actually joke that you should not become a bank teller in college because working at a bank can become so comfortable that you won’t want to leave! With opportunities for advancement, solid pay (about $12/hour), regular hours, and plenty of holidays off, being a bank teller is a pretty good job for a college student. You need to be detailed and good at math along with having the people skills of someone in reception or customer service.

 

Tutor

Tutoring is probably one of the best ways to earn money while in school if you have enough experience in one area of study and can help lower level students navigate their coursework. Tutoring is highly flexible and not limited to business hours, plus you can usually do it at school or at a library or home, and it has a higher hourly rate than many other jobs. Tutors can easily make $20–$40/hour depending on the area of study, helping you make extra cash in less time and strengthening your own study skills while you’re at it.

 

If you’re looking for ways to reduce your student loans for college, consider one of these top jobs for students so you can pay some of your expenses with your income!

 

Check Out These Resume Tips from Hiring Managers

 

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.

Understanding Student Loan Payments

There are many options when it comes to paying student loans, and just as many questions! Questions like what these terms and situations can mean for a borrower. If you have questions about your student loans or want to learn more about how you can manage your repayment, check out these tips on understanding student loan payments.

 

What is a student loan servicer?

 

Your student loan servicer is the company collects your payments. According to Consumer Financial Protection Bureau, they typically handle most administrative task associated with your loan. Servicers do things like, answer customer service questions and enforce regulations provided by your lender related to your loan. You pay them for your loan and they give you options for repayment and deferment. It’s likely you’ll take out a student loan with one company and end up getting a different servicer. Your servicers can change too if your loan is transferred.  If you choose to consolidate or refinance with a company that gives you lower payments, better interest, or quicker payoff you’ll probably receive a different servicer.

 

When should you start making payments?

 

Start making loan payments whenever you can. Most student loans allow a period of non-payment while you are in school, known as a grace period.  On average most student loan lenders require payments to be made when the borrower is at less than half-time status for six months. You don’t have to wait until six months after graduating to make payments, though! If you can make payments while in school, you will save on interest and cut the time it takes you to pay off your student loans.

 

What’s a student loan grace period?

 

The grace period is typically a 6 month period that occurs after graduating, dropping below half-time enrollment status, or leaving school. During the grace period, you are not required to make payments on your student loans. Grace periods will vary based on the student loan lender that you have. Know what your grace period is so you aren’t caught off guard with late payments.

 

Can I pay extra on my student loans?

 

Yes! There are no prepayment penalties for federal or private student loans. Prepayment penalties are fees charged for reducing your loan balance or paying the entire loan off early. Many other types of debt like mortgages can have a prepayment penalty. Prepayment penalties were created to limit early payment of a debt, but no need to worry about that with your student loans. Instead, pay attention to how additional payments are applied to your loan.

 

If you make payments online some loan servicers allow you either pay extra on the principal or apply the additional toward interest on the next payment. Basically, if you choose to pay over the minimum depending on who your lender is, you may need to specify the amount that is a prepayment. Prepayments on your loans go towards the principal balance.  You should aim to make prepayments sometimes referred to as overpayments because it lowers the total amount of the loan. When the principal balance decreases it reduces the amount of interest you’ll pay in the long term. The next monthly payment will usually remain the same. Since you’re not applying additional money toward your next payment if you choose this option.

 

Check Out This Prepayment Calculator

 

Not all loan servicers will direct prepayments towards the principal of your loan unless specified by the borrower. Some lenders will count the prepayment as a payment towards your next monthly payment.  That can make it seem like your extra payments are hardly affecting your balances at all.

 

Instead, try to direct additional payments toward one loan’s principal. For example, if you have several loans through the same servicer, but one is $1,000, you can pay that off within a year. If you pay an extra $100 per month on that one $1,000 loan principal- it will be gone faster! If you’re not allocating prepayments strategically, you won’t see this same kind of progress.

 

What if I can’t pay my student loans?

 

There are limited options available when you can’t pay student loans. Weigh your options carefully. When making student loan decisions make sure you’re not adding stress to your future. First, contact your servicer immediately. You’ll have more flexibility if you stay on top of repayment before you start making late payments or missing payments. Avoid missing or late payments at all costs! Not only will late or missed payments damage your credit they put you at risk for extra fees. In addition to damaging your credit, risking additional fees, you could lose benefits available to only those who pay on time.

 

Repayment Options (Not a Long Term Solution)

Look at repayment options. If you can’t pay with the plan you’re currently on there may be a better repayment option. If you are able to select another repayment option that lowers your payment you will want to consider doing so temporarily.  Doing this quickly will avoid you being late on future payments. It’s important to note that repayment plans are not a long-term solution to paying back student loan debt. We wouldn’t recommend for the long term because in more income contingent repayment plans the monthly payment isn’t covering the interest that is accruing during that period. Therefore, you can make a payment every month but the overall loan balance remains the same or could even increase!

 

Consolidating Student Loans

If you’re in good standing on your loans, but want to reduce your payments student loan consolidation might be a good idea. Consolidation can make it easier for you to manage paying all of your loans, open you up to other repayment options, and reduce fees. It’s not a sure thing, but it doesn’t hurt to investigate this option and see if it is right for you.

 

Deferment or Forbearance: Use with caution!

The last options to consider are deferment or forbearance. If you can avoid these options like changing repayment or consolidating, do it! Usually, borrowers have to be in financial hardship to qualify for deferment or forbearance. That doesn’t mean you’re off the hook because you’re in a tough financial spot. Depending on the loan you have, your interest might be added to the principal balance. This is really not ideal because it means your balances will grow. When you start paying again, your balances will be higher than where they are today. This is called capitalized interest—it equates to paying “interest on interest” and can get out of control fast if you use deferment or forbearance for longer-term hardship.

 

Most people don’t qualify for loan forgiveness because they are having a hard time paying their loans, but be aware that is possible. If you have developed a disability that precludes you from using your education or went to a school that has since shut down you might be eligible for forgiveness. Don’t count on this as an option, and don’t delay if you can’t pay your loans. Start investigating what’s available to you as soon as possible.

 

What are income-based repayment options for student loans?

 

Private loans may have options available that will lower your payments if you have a lower income, but the standard income-driven repayment plans apply to federal loans. Your monthly loan payment is calculated on your income. Your income is based on some stipulations and it may be taken into account things like your family size.

 

Income-Based Repayment

The standard income-based repayment plan adjusts your payment if your loan payments are more than 10% of your discretionary income. Based on when you took out your loans, there may be other benefits or stipulations to meet in order to qualify. Regardless, you’ll have to calculate your loan payments based on your income and family size through your servicer.

 

Income-Contingent Repayment

This type of repayment limits payments to 20% of discretionary income. The income will be based on income and family size. It is the only option available to Parent PLUS loan borrowers and requires PLUS borrowers to consolidate their loans to qualify.

 

Pay As You Earn and Revised Pay As You Earn

There are limits on which form of this repayment plan you can qualify for. These qualifications are based on when you took out your loans. On the Pay, As You Earn plan you’ll have payments that correlate to 10% of discretionary income. The payment will be based on how much money you’re making and limiting the term of the loan to 20–25 years depending on whether you were a graduate or undergraduate borrower.

 

Learn More About Parent Loan Refinancing

 

 

How does refinancing change my student loan payments and payback?

 

Refinancing opens you up to lots of different options. Some qualifications to refinance include illustrating a responsible credit history. People often look into refinancing when interest rates are high, they have a steady income and good credit. Refinancing could help borrowers qualify for lower interest rates. Sometimes people refinance in order to get new loan terms and pay off their loans sooner. Shortening the loan terms on your loan can help you to pay less interest over the life of the loan. Borrowers will refinance to a longer term that allows them to continue the loan payments for a similar or longer period of time.

 

9 Signs It’s Time to Refinance Student Loan Debt

 

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.

Don’t Wait for Graduation to Pay Down Student Loan Debt

What does a currently enrolled graduate student, a recent graduate, or a Doctorate student all have in common? The answer is simple, student loans. Sounds like a bad joke, but student debt in the United States is no joking matter. The current student loan debt total has hit $1.5 trillion as of 2018 according to Federal Reserve data. If you find yourself a borrower of student loan debt, know that debt doesn’t just start after graduation. The moment your loan is approved you become a borrower and therefore take on the responsibility to pay down that debt. As a borrower, here are some ways to be financially responsible and pay down debt quickly ensuring yourself a brighter financial future.

 

Don’t Go Overboard

 

According to CollegeBoard the average full-time bachelor degree seeking student, who attends a four year school will pay somewhere in the range of $21,370 to $48,510 per year in 2018 – 2019.  Now the average Master’s seeking student will pay about $19,080. These estimates do include the cost of room and board and will differ depending on if the student is attending an out of state school or an in-state school.

 

When the time comes to apply for your loans, be sure you have a budget! We cannot stress this point enough you need a financial plan before you make the decision to apply for student loans. Know what you’ll need to borrow money for. Think about tuition costs, housing, meals, book costs, personal costs, and transportation costs. Only borrow what you absolutely need for school.

 

The Countdown

 

Don’t be the student who has the countdown until graduation. You know, the one using the grace period to look for their future career and move back in with their parents. Now there’s nothing wrong with moving back in with the parents to save a few bucks, in fact, we would encourage it. What we mean is instead of waiting until the clock starts at the end of your grace period start paying down debt on day one! The sooner you can start throwing money at your student loans, the better off your future self will be.

 

Now it doesn’t have to be an astronomical amount of money. Even the smallest contribution towards your debt will help you in the long run. Let’s say that instead of going out to brunch with your friends on the weekend you decide to make it. Let’s say you usually buy an egg and cheese, on a bagel with a coffee for about $10 for simplicity. That $10 a week can turn up to $40 a month.

 

Say you took out $30,000 in student loan debt. If you completed a $40 payment every month while you’re in school, you would save $2,515 from the total of your loan. Yes, you can drop almost $3,000 off your loan by simply making a $40 a month payment. Small sacrifices make all the difference in paying down your student loans before graduation.

 

It’s No Vacation

College in the past was seen as an experience but it is not any longer. Don’t treat your education like a vacation with a limitless budget. According to the Bureau of Labor Statistics, the annual American household cost for eating out is $3,000. Even if it’s only one person, that would count as a household. Broken down that would be $250 a month the average household spends eating out! Before you start spending money on food remember that’s money that could go towards your student loan debt. We all have to eat to live, but is eating out necessary? Try using that meal plan or doing weekly grocery shopping and meal prep.

 

Stay in Budget

Someone once said “Just because you can, doesn’t mean you should” that could not be truer here. Though you may have money for streaming services like a Spotify Premium® membership or Netflix® – doesn’t mean you should have it. In addition to cutting down on eating out, you could lose that Netflix® account. About nine out of ten college students use Netflix® according to Daily to Reader. If you’re living on campus you’re provided with free cable. Yes, the keyword being “FREE” – drop the subscription services and put them towards student loan debt. No, you won’t be able to watch the latest series of Stranger Things on your own, but I’m sure your friend or their friend has Netflix®. The Basic plan on Netflix® as of 10/2018 is $7.99 a month. Let’s take your savings from cutting back on eating out including our previous example- $100 and savings from losing that Netflix® subscription $7.99 that equates to 107.99 a month towards student loan debt. When you pay $107.99 every month towards your loan it is a savings of $7,083.71 from the total loan amount.

 

They’re Called Doctors

 

If you’ve ever seen the movie Tommy Boy you’ll get the reference. If not, you can watch the clip online. Going to school for seven years is for doctors, not the average student seeking a bachelor degree. All jokes aside, you need to do your best to graduate on time. Staying in school longer means more debt and that means more money you’ll need to pay off in the long run.

 

In recent years there has been a trend of typical 4-year degrees taking 6 years to achieve. Students who take longer to graduate are spending 50% more than participated for their degrees according to Student Debt Relief. One major tip (no pun intended) know what you want to major in before starting. It’s okay to change your major but work closely with counselors take summer classes. Do your best to stay on track for your estimated graduation date.

 

Evaluate Loans

Yes, you finally graduated! Don’t be fooled the work doesn’t stop. To continue being a financially responsible borrower you’ll need to evaluate the types of loans that you have. Do you have federal or private loans? The type of loans that you have will have major implications on the options that you available to you moving forward.  Pay attention to your interest rates and knowledgeable regarding repayment types.

 

Be wise; if you are within that 6 month grace period, continue to make those payments because we know that they will pay for themselves and then some. Create a long-term plan to pay down your debt. Use your income to create the long-term plan and stick with your budget. There are so many resources available at your fingertips to research things like loan consolidation, student loan refinancing, student loan forgiveness, and deferment and forbearance.

 

Your responsibility for staying a responsible borrower is to continue those healthy spending habits that you created for yourself in college. In addition you should look to further your education. Do you want to get a Master’s Degree? Use reliable sources and stick to a budget and long-term plan. Education is so no joke. Whether you’re the currently enrolled graduate student, a recent graduate or a Doctorate student debt doesn’t have to weight you down forever.

 

Learn More About Grace Periods

 

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.

Employer Participation in Student Loan Assistance Act H.R. 795

Nothing could be better than working for a top company that helps you pay off your student loans, right? Well, a bill was introduced by legislators on 2/1/2017 that is trying to make this a reality. This bill was introduced as the Employer Participation in Student Loan Assistance Act. In addition to the introduction of this Act, the Internal Revenue Service (IRS) also released a private letter ruling. What could these events mean for companies and employees who carry student loan debt?

 

Employer Participation in Student Loan Assistance Act

First, this bill would amend the tax code by giving tax breaks to employers that provide educational assistance to employees. Educational assistance can be in the form of contributions to student loans through either a payment to the employee or lender.

Specifically, this act would allow employers to offer a tax-free student loan benefit in addition to a salary to its employees.

 

IRS Private Letter Ruling

 

Recently, there was a private letter ruling released by the Internal Revenue Service (IRS). If you want to review the contents of the private letter ruling, it can be found here. The ruling allows employers to use 401(k) plans to help employees pay down their student loan debt. It is done by taking the employer 401(k) match to pay down student loans.

 

Any employee who is eligible for a 401(k) plan would be eligible for this plan. The ruling states that the plan is a voluntary program that employees must elect to enroll. Employees who choose to participate in this plan would be eligible for non-elective contributions made by the employer to their student loan debt. These contributions would be equal to what would have been contributed to a 401(k) plan had the employee opted out of the program.

 

What Does Student Loan Debt Assistance Mean for Employers?

When managing a business, it is imperative that you stay on top of recent news. Part of staying on top of things includes understanding what challenges your employees face. Both these aspects of operating a business and understanding the needs of your employees, however, can fall hand in hand. When it comes to student loan debt assistance, it can be a huge positive for any business. Not only does student loan debt assistance help employees achieve their financial goals, but it also brings many benefits to a firm.

 

Offering a student loan debt assistance program does not typically cost a company extra. The employer contributions to student loans are what a company would have typically made as a 401(k) contribution. Therefore the costs of providing 401(k) contributions and student loan debt assistance are equal. Another positive that comes from offering a program like this is that it helps with finding top talent, recruiting, and retaining all-stars. With older generations of employees retiring in record numbers and the workforce shifting to younger millennials, it’s important to take some time to examine the benefits of providing student loan debt assistance.

 

As many millennials have student loans and report that paying them down is a priority over saving for retirement, companies should begin thinking about reevaluating their benefits package to attract millennials. Finding ways to help this generation pay off student loans could be a big boost to a company’s recruiting strategy. Offering student loan payment assistance could put a company on the cutting edge as far as millennial professionals are concerned.

 

Click to Learn More About ELFI for Business

 

According to a benefits report by OneDigital, nearly 80 percent of employees surveyed by American Student Assistance felt that an employer-sponsored student loan repayment benefit would be a deciding factor in accepting a job. This could be a huge differentiator for an employer aiming to recruit the best employees.

 

The American Student Assistance survey also showed that 86 percent of employees would feel compelled to stay with an employer for at least five years in exchange for student loan repayment assistance. Considering how much companies spend on turnover (recruiting, training, and onboarding new employees), this could mean huge potential savings on talent management costs for employers.

 

What Does Student Loan Debt Assistance Mean for Employees?

Some companies already offer student loan assistance, but these funds are usually taxed. This type of assistance isn’t as attractive as pre-tax funds because taxes reduce the impact of payments on student loans. Tax-free repayment funds from an employer could be more effective in helping graduates pay down their student loans faster. Employees would avoid incurring taxes associated with this type of assistance.

 

Many Millennials also face the question of, “Should I save for retirement or pay down debt first?” Student loan debt assistance could be a solution that addresses both concerns. Young employees would have the ability to make substantial payments towards their student loan debt. With these large payments, they will be able to cut down their repayment time. That means young employees would have the ability to start saving for retirement earlier in their career instead of trying to pay down their debt.

 

Looking to the Future of Employment and Student Loan Debt

 

With the recent Employer Participation in Student Loan Assistance Act and IRS Private Letter Ruling, it seems student loan debt has become a problem for employees. Since employees are having difficulties with paying down student loan debt, it is time for employers to take action. Not only will employers benefit from offering student loan debt assistance programs, but it will most likely be at little or no cost to them.

 

If this act becomes a law, experts think that companies will immediately begin to rethink their benefits package and consider student loan debt assistance as a way to attract the best employees. Though it may not be easy for millennials to land a position with one of these companies, they will certainly have another factor to decide in student loan debt assistance when choosing their employer.

 

Interested in starting a conversation regarding your student loans? Give us a call: 1-844-601-ELFI.

 

5 Benefits Millennials Look For in Employers

 

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 web sites 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.

Cosigners and Cosigner Release – What You Need to Know

As more millennials are stepping into experienced job roles and making more money than we were a few years ago, cosigner release is becoming a popular topic. You may have seen a letter in the mail from your student loan servicer or heard from others that they were able to release a parent or relative from cosigner duties. But what does this mean?

 

What are the responsibilities of a cosigner?

A common misconception about cosigning a loan is that you’ll be the sole responsible party for the loan. Being a cosigner means that you and the student taking out the student loan are jointly responsible for paying the balance of the loan. In the event that the borrower is not able to pay, the cosigner becomes the focus of repayment efforts by the loan holder or servicer. If the borrower is unable to make payments because of a disability, the loans might be forgiven. There are some special cases like this where the cosigner won’t have to pay, but in general, being a cosigner is a long-term commitment that can’t be eliminated except through payoff, release, or extenuating circumstances.

 

How does cosigning affect credit?

Before asking a friend or family member to take on the responsibilities of a cosigner it’s important to understand how that will affect their credit. Since a cosigner and borrower share the responsibility of a loan, it appears on both of their credit reports. If loan payments are made on time and the borrower is in good standing, then the cosigner will also benefit from the good credit. If the loan has late payments or does into delinquency, this will negatively affect the cosigner’s credit. In addition to affecting the credit score of the cosigner, they may become limited as to the amount of credit available to them. Before asking someone to be a cosigner verify they are not looking to have any large amounts of credit like a mortgage, credit card, or car loan.

 

When do I not need a cosigner?

Students do not need cosigners to qualify for Federal loans like a Stafford or Direct Loan, but it can improve the chances of being approved. It’s very common for students who apply for private loans to add a cosigner to get the amount that they need and a typically qualify for a much better rate than they could get on their own.

 

What is cosigner release?

Cosigner release is when the person who cosigned on a loan for you is taken off of the agreement and no longer considered partially responsible for the loan. This makes the borrower solely responsible for the remaining amount of the loan. Some student loan refinancing lenders don’t offer cosigner release.

 

When student loans are granted, they are provided based on your cosigner’s credit and the borrower’s credit.  In traditional cosigner releases the terms of the loan would remain the same as when the borrower took out the loan with the cosigner on it. The only difference with the cosigner release is the cosigner is being removed. When they allow you to release your cosigner depends on the company, if it is offered at all.

 

Most companies that offer cosigner release allow you to do so, once you’ve made two consecutive years of payments on time. Others may have longer terms for on-time payments before they allow you to apply for release. If you haven’t been making the full payment, that might eliminate your eligibility to release your cosigner. The release also has to be initiated by the borrower and can’t be requested through the servicer by the cosigner.

 

Not all companies offer cosigner releases. As we mentioned earlier some since loans are originated to include that cosigner, just removing them can be tough. That’s why many companies don’t offer cosigner releases but don’t stress. If you choose to refinance a loan with a cosigner but then decide You’d like to remove that cosigner, there are other options available to you.

 

Will refinancing my student loan release my cosigner?

People often ask, “What if I just refinance my loan without the cosigner on it. Is it the same as a cosigner release?” Refinancing student loans is not the same thing as getting a cosigner release.  Before we go into greater detail it’s important to understand that very few loans are refinanced with a cosigner.

 

If you are in a position to refinance and qualify, then you don’t need a cosigner to make the new loan possible. There are some exceptions, but during refinancing, you’d be able to check with the servicer to see what terms you could get on your own and then go from there. Most companies that refinance student loan debt will allow you to add a cosigner if you do not qualify on your own, but the cosigner will need to submit some information. If you choose to set up a new refinanced loan without the cosigner, it releases them from the obligation of the former loan.

 

You may be asking “Is there another way that a cosigner can be removed from a loan without utilizing a cosigner release?” well the answer is yes. Aside from utilizing a cosigner release or refinancing the loan without the cosigner, the borrower or cosigner can pay off the debt. Once the debt is paid off both parties are no longer responsible for the debt.

 

Before you ask someone to cosign on a loan, consider these things and be sure that they are okay with the responsibility. Make sure that you as a borrower have an understanding and a plan for paying back that debt. If you don’t think that you can pay back the debt or are uncertain of how you will pay off the debt you should not involve a cosigner.

 

Most students ask their parents to cosign, but frequently have another relative help them by cosigning to get a loan. Know that cosigner release might be possible later, but don’t count on it, and check with the financial institution that holds your loans about cosigner release. You might be able to let mom or dad off the hook by refinancing or paying the debt down in full.

 

Click For the Difference Between Parent PLUS Loans & Cosigning Education Loans

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