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This Week in Student Loans: June 12, 2020

June 12, 2020

Please note: Education Loan Finance does not endorse or take positions on any political matters that are mentioned. Our weekly summary is for informational purposes only and is solely intended to bring relevant news to our readers.

 

This week in student loans:

will there be a second student loan stimulus package?

Will There Be A Second Student Loan Stimulus Package?

The CARES Act passed in wake of the coronavirus pandemic provided relief to many federal student loan borrowers, but the payment suspensions are set to end on September 30. However, the newly proposed HEROES Act included provisions that will provide relief to borrowers through September of 2021. This Forbes article provides detail as to whether their will be a second stimulus package for borrowers.

 

Source: Forbes

 

low rates on federal student loans

Take Advantage of Low Student Loan Interest Rates

The interest rate on federal direct student loans for undergraduates for 2020-2021 is 2.75%. These historic lows can be attributed to the coronavirus pandemic, and this U.S. News article explains why those planning to attend college should take advantage.

 

Source: U.S. News & World Report

 

question mark

Should You Continue Paying Private Student Loans if Payments Are Suspended?

With many wondering whether they should continue to pay federal student loans during the CARES Act suspensions, there has also been some question around private student loans, as a multi-state pact that emerged recently provides relief to private student loan borrowers.

 

Source: Fox Business

 

debt relief

Student Loan Debt Relief: What Are Your Options Now?

With many changes happening in the world of student loans as of late, from the CARES Act passed months ago to the newly proposed HEROES Act, this Forbes article outlines the current options available for student loan borrowers to obtain relief.

 

Source: Forbes

 

 

That wraps things up for this week! Follow us on Facebook, Instagram, Twitter, or LinkedIn for more news about student loans, refinancing, and achieving financial freedom.

 

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

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Current LIBOR Rate
2020-09-24
Current LIBOR Rate Update: September 2020

This blog provides the most current LIBOR rate data as of September 3, 2020, along with a brief overview of the meaning of LIBOR and how it applies to variable-rate student loans. For more information on how LIBOR affects variable rate loans, read our blog, LIBOR: What It Means for Student Loans.

 

What is LIBOR?

The London Interbank Offered Rate (LIBOR) is a money market interest rate that is considered to be the standard in the interbank Eurodollar market. In short, it is the rate at which international banks are willing to offer Eurodollar deposits to one another. Many variable rate loans and lines of credit, such as mortgages, credit cards, and student loans, base their interest rates on the LIBOR rate.

 

How LIBOR Affects Variable Rate Student Loans

If you have variable-rate student loans, changes to the LIBOR impact the interest rate you’ll pay on the loan throughout your repayment. Private student loans, including refinanced student loans, have interest rates that are tied to an index, such as LIBOR. But that’s not the rate you’ll pay. The lender also adds a margin that is based on your credit – the better your credit, the lower the margin. By adding the LIBOR rate to the margin along with any other fees or charges that may be included, you can determine your annual percentage rate (APR), which is the full cost a lender charges you per year for funds expressed as a percentage. Your APR is the actual amount you pay.

 

LIBOR Maturities

There are seven different maturities for LIBOR, including overnight, one week, one month, two months, three months, six months, and twelve months. The most commonly quoted rate is the three-month U.S. dollar rate. Some student loan companies, including ELFI, adjust their interest rates every quarter based on the three-month LIBOR rate.

 

Current 1 Month LIBOR Rate – September 2020

As of September 3, 2020, the 1 month LIBOR rate is 0.16%. If the lender sets their margin at 3%, your new rate would be 3.16% (0.16% + 3.00%=3.16%). The chart below displays fluctuations in the 1 month LIBOR rate over time.

  Chart Showing Current 1 Month LIBOR Rate for September 2020

(Source: macrotrends.net)

 

Current 3 Month LIBOR Rate – September 2020

As of September 3, 2020, the 3 month LIBOR rate is 0.25%. If the lender sets their margin at 3%, your new rate would be 3.25% (0.25% + 3.00%=3.25%). The chart below displays fluctuations in the 3 month LIBOR rate over time.

  Chart Showing Current 3 Month LIBOR Rate for September 2020

(Source: macrotrends.net)

 

Current 6 Month LIBOR Rate – September 2020

As of September 3, 2020, the 6 month LIBOR rate is 0.29%. If the lender sets their margin at 3%, your new rate would be 3.29% (0.29% + 3.00%=3.29%). The chart below displays fluctuations in the 6 month LIBOR rate over time.

  Chart Showing Current 6 Month LIBOR Rate for September 2020

(Source: macrotrends.net)

 

Current 1 Year LIBOR Rate – September 2020

As of September 3, 2020, 2020, the 1 year LIBOR rate is 0.43%. If the lender sets their margin at 3%, your new rate would be 3.43% (0.43% + 3.00%=3.43%). The chart below displays fluctuations in the 1 year LIBOR rate over time.

  Chart Showing Current 1 Year LIBOR Rate for September 2020

(Source: macrotrends.net)

 

Understanding LIBOR

If you are planning to refinance your student loans or take out a personal loan or line of credit, understanding how the LIBOR rate works can help you choose between a fixed or variable-rate loan. Keep in mind that ELFI has some of the lowest student loan refinancing rates available, and you can prequalify in minutes without affecting your credit score.* Keep up with the ELFI blog for monthly updates on the current 1 month, 3 month, 6 month, and 1 year LIBOR rate data.

 
 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

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Man refinancing his student loans to a longer term
2020-09-23
Should You Refinance Student Loans to a Longer Term?
If your student loan payments are becoming overwhelming, it could be time to consider refinancing. When you refinance your student loans, you’ll not only have the option of consolidating multiple loans into one monthly payment; you’ll also have the chance to change your student loan repayment term.   When you take out private loans, you have the option of choosing to repay them over a short period of time or a longer period. We’ve compiled the pros and cons of both, as well as some situations in which a longer student loan repayment term might be the right fit for you.  

Is it time to refinance your student loans?

Refinancing your student loans is a great way to lower your interest rate and earn financial freedom more quickly. You can refinance both private and federal loans, and if you’re tracking a multitude of payment dates and timelines, consolidating your loans through refinancing can be a great way to simplify your financial life and work toward becoming debt-free.   You can refinance your loans as many times as you’d like, so even if you’ve already refinanced once, it never hurts to explore new lenders! Now is an especially good time to refinance your student loans, as interest rates have recently dropped as a result of the COVID-19 pandemic. As of September 18, 2020, student loan refinancing rates are as low as 2.39% for variable interest rate loans and 2.79% for fixed interest rate loans.   If you think now is the right time to refinance your student loans but you’re not sure, keep reading for more insights. We’re here to support your journey toward financial freedom and applaud your researching smart money moves!  

Signs it might be time to refinance your student loans:

  • You think you could earn a better interest rate. If interest rates recently dropped or your credit score has gone up, research your options to see if refinancing could be the right choice for you.
  • You have mostly private student loans. If your loans are through private lenders, now could be the time to consider refinancing, as you won’t risk losing any federal benefits.
  • You need more financial flexibility. If your student loan payments are keeping you from accomplishing other financial goals, refinancing could help by lowering your interest rate and extending your student loan repayment term. To learn more about the pros and cons of a long student loan repayment term, read on.
 

What happens when you change your student loan term?

A student loan repayment term calculates how long you have to pay back your loans in full. ELFI, for example, offers varying repayment terms for student loan refinancing.   When you consolidate and refinance your student loans, you’ll have the opportunity to change your student loan repayment term. This is especially useful if you’ve taken out several loans with different amounts and timelines.  

Choosing a longer term for your student loans

Opting for a longer student loan repayment term means you will pay more in interest over time. Each monthly student loan payment, however, will have a lower balance than if you had opted for a short repayment term.   If you're looking to accomplish several financial goals, like saving for a down payment on a house or purchasing a new car, lengthening your student loan repayment term may give you the flexibility you need to work toward those goals. Be advised, however, that if you do opt for a long student loan repayment term, the total amount you’ll pay in interest will go up. At the end of the day, the right student loan repayment term for you depends primarily on your long-term financial goals.

It might be time to refinance your student loans to a longer term if:

  • You want the financial flexibility of a lower monthly student loan payment
  • You’re expecting a drop in income and need to lower your monthly expenses
  • You’re having difficulties keeping up with your current student loan payments
 

What about shortening my student loan repayment term?

If none of the above scenarios apply to you and your most pressing question is “how can I pay off my student loans faster?” then a short student loan repayment term could be right for you.   Unlike a long student loan repayment term, you’ll make larger monthly payments but will pay less in total interest. Opting for a short student loan repayment term is the right choice for borrowers who have the financial flexibility to make larger monthly payments for a short period of time.   Learn more about short student loan repayment terms in our recent blog, “Choosing the Right Student Loan Repayment Term.”  

Refinancing student loans with ELFI

Ready to explore your student loan refinancing options with ELFI? Great! We’re excited to help. In addition to potentially lowering your interest rate and choosing a new student loan repayment term, when you refinance with ELFI, you’ll also work directly with a Personal Loan Advisor who will help provide a seamless, personalized refinancing experience.   Don’t take our word for it. Check out recent customer reviews on Trustpilot! If you’re ready to explore potential interest rates by refinancing with ELFI, check out our Student Loan Refinance Calculator.*  
  *Subject to credit approval. Terms and conditions apply.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no­­­ control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
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Dad with Parent PLUS loans hugging daughter
2020-09-16
Should You Refinance Private Parent Loans in 2020?   
Are you a parent who took on student loans for your child to attend school? If so, you are not alone. As of 2019, over 3.4 million people have Parent PLUS loans. The payment of the loans may become burdensome as the desire to save and enjoy retirement approaches. If extra money in your budget could help, Parent PLUS loan borrowers may want to take advantage of the current low rates and refinance the student loans they took on for their children.  

Types of Parent Loans

Before you decide whether refinancing is beneficial for you, it’s helpful to know what types of loans you have. Parents may have private parent loans that are borrowed through a private lender such as a bank, or Parent PLUS loans that are borrowed through the federal government. Parent PLUS loans are also known as Direct PLUS loans. Here’s a breakdown of how the two types of parent loans differ:
  • Interest Rates: Typically private parent loans will have a lower interest rate than Parent PLUS loans. Parent PLUS loans can have an interest rate as high as 7.06% in recent years, whereas private parent loans can have an interest rate of around 4%.
  • Loan Terms: Private parent loans can also have a fixed or variable interest rate and have a loan term from 5 to 25 years. Parent PLUS loans have a fixed interest rate and an origination fee. The loan term can last from 10 to 25 years.
  • Additional Benefits: Since the Parent PLUS loan is through the federal government it is eligible for an income-contingent repayment plan, meaning the payment is based on your income and family size.
 

Current Benefits for Parent Loan Borrowers

Currently, Parent PLUS loans are eligible for benefits through the federal government due to the CARES Act passed by Congress on March 27, 2020, in response to the COVID-19 pandemic. The benefits are set to expire on September 30, 2020, however, an executive order was issued on August 8, 2020, directing the benefits to continue through December 31, 2020. The protections provided by the CARES Act, and continued through the executive order, for Parent PLUS loans include:
  • The interest rate on the loan is temporarily reduced to 0%. No interest will be accruing on the loan during this time. However, interest will begin accruing again at the previous interest rate on January 1, 2021.
  • Administrative forbearance - This provides for a temporary suspension of payments during this time. Payments are set to resume in January 2021. This means you can save money to make a lump sum payment on your Parent PLUS loan when payments resume. Alternatively, you can use the money as an emergency fund if payments become difficult to make.
  • Stopped collections - Any defaulted loans would no longer be subject to collections during this time period.
 

How to Know Whether You Should Refinance

With these benefits currently in place, it is fiscally responsible to take advantage of the federal protections provided for Parent PLUS loans rather than refinancing at this time.  However, private parent loans are not eligible for any federal protections, making them prime candidates for refinancing. Currently, interest rates for refinancing are at an all-time low because of the Federal Reserve lowering interest rates in response to the pandemic. This makes it a great time to take advantage of these low interest rates for private parent loans.   Refinancing rates for private parent loans are as low as 2.39% for a variable interest rate and 2.79% for a fixed interest rate as of September 14, 2020. This new rate could lead to significant savings depending on your current balance, rate and loan term. At ELFI, you can prequalify to see what rate you would be eligible for. You can also use our Student Loan Refinance Calculator to get an estimate of your savings based on a range of interest rates.*   Not only does refinancing private parent loans save you money monthly by securing a lower interest rate, but refinancing to a lower interest rate also saves you in interest costs over the loan term. In addition, the other benefits of refinancing private parent loans are:
  • Combining multiple private and federal Parent PLUS loans into one loan with one payment
  • Changing the loan term length by either shortening it to save on interest costs or lengthening it to lower your monthly payments
  If refinancing sounds right for you, it’s important to know the eligibility requirements. These will make you more likely to qualify for the best rate at ELFI:
  • A strong credit history, with a minimum credit score of 680
  • Steady employment with a minimum income of at least $35,000
  When you refinance student loans at ELFI there is never an application fee or origination fee. You will also never pay a prepayment penalty.

Bottom Line

Although interest rates are at a record low, it is advantageous to benefit from the current Parent PLUS loan protections for the time being. Then, in 2021, you can take advantage of the low interest rates if you choose to refinance. If you have a private parent loan, now is a great time to lock in a lower interest rate and start saving some money.  
  Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no­­­ control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.   *Subject to credit approval. Terms and conditions apply.
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