Top 10 Ways to Pay Off Student Loans Faster

July 20, 2017

Once you’ve graduated, found a great job, and started to pay off student loans, you might begin to wonder if there are ways to pay down your loans faster and perhaps save some money on interest payments. Or you might start thinking about this while you’re still in college. Here are several options to explore if you want to pay off student loans more quickly.

Don’t take loans you don’t need. Loans could be a necessary part of the collegiate landscape, but you do have some choices to make when it comes to the amount of loans you take. Some students attend less expensive colleges and work part-time jobs to avoid taking loans, while others skip work entirely and use student loans to pay for everything from tuition and books to living expenses. If you want to reduce the amount of time you spend paying loans after graduation, one way to accomplish your goal is to limit the loans you take during your time in college.
Read and understand all terms. Here’s an excellent lesson for adulthood: never sign anything you haven’t read. Don’t agree to anything until you’ve take the time to read and understand what you’re getting into, and if you don’t understand it, ask parents, lenders, or college counselors to explain the terms.

Is a loan fixed or variable? When does interest begin to accrue? What are the terms for repayment (interest rate, monthly payments, length of loan, etc.)? Knowing the fine points of your loans can help you later on when you’re trying to figure out ways to pay them off faster and potentially reduce overall costs.

Set a budget. You’ve got a good job, you’re earning decent money, and you have disposable income, thanks to your college education. This doesn’t give you carte blanche to spend like it’s going out of style.

You did the responsible thing and earned a college degree. Continuing to make wise financial decisions will help you to pay off student loans faster. Start by setting a budget and living frugally while you still owe money. With a plan to repay loans and an appropriate budget in place, you have the best chance to whittle down your loan balance as quickly as possible.

Start paying as soon as possible. If you’re lucky enough to enjoy some kind of grace period before loans begin to accrue interest, as with Subsidized Stafford Loans or Perkins Loans, for example, take advantage by paying as much as you can. Even if your loans are unsubsidized and accruing interest without actually having payments due, anything you’re able to pay back while you’re in school or during your grace period will result in less interest building up over time.
Pay more than the minimum. The minimum payment is merely a suggestion, insomuch as you can always pay more toward the principal (although not less). What happens when you pay more than the minimum required monthly payment? You not only pay down your loan more quickly, but the faster you pay the principal, the less overall interest you accrue, lowering your total cost.
Avoid additional debt. The Credit Card Accountability Responsibility and Disclosure Act of 2009 established restrictions on how credit card companies could market to minors and students, ostensibly to stop young and naïve individuals from being lured by seductive marketing and ending up with potentially damaging long-term credit card debt. This won’t protect you once you graduate and credit card offers start rolling in.

It’s all too easy to go wild with credit cards, never fully realizing that every transaction is like taking a loan. Credit cards are not cash-in-hand – they’re debt, plain and simple. Don’t make the mistake of digging yourself into a hole you can’t get out of.

When you handle your credit cards responsibly and use them sparingly, you can continue to build credit while paying off your student loans, as well as pay down loans faster with the money you’re not paying to credit card companies in interest.

Take applicable deductions. Currently, the IRS offers students and graduates paying student loans the opportunity to take advantage of the American Opportunity Tax Credit (AOTC), which was made permanent in 2015 under the Protecting Americans Against Tax Hikes (PATH) Act. Depending on your circumstances, you could receive a tax credit of up to $2,500. For more information and to find out if you qualify, you can locate your local taxpayer assistance center through the IRS website here.
Look into loan forgiveness. Loan forgiveness is a complex process, but there are a number of ways in which you could become eligible to receive forgiveness, discharge, or cancellation of student loans, as spelled out by the Office of Federal Student Aid. Generally speaking, you have to meet criteria related to:

Loan type
Repayment plan
Payment schedule
Employment type (such as teaching or public service jobs)

Forgiveness, discharge, or cancellation of student loans could also be related to:

School closure
False certification of student eligibility
Unauthorized payment discharge
Identity theft
Borrower defense to repayment
Total and permanent disability
Death

Your ability to take advantage of opportunities for student loan forgiveness is entirely dependent on your circumstances, and you may need help navigating these tricky waters. Borrowers expecting their loans to be forgiven often make lower payments early on, which could result in even larger interest payments if they later find that they are ineligible for the program. It’s a good idea to speak with your lender, your school, your employer, or a representative of the Office of Federal Student aid to find out if you qualify and what steps you should take to seek loan forgiveness.

Look for jobs that offer education reimbursement. Some employers offer opportunities for education reimbursement as part of a benefits package. You should always ask if this is offered before selecting a job and find out exactly what the terms are and what criteria must be met in order to take advantage of such offers. Even if your previous student loans are not covered, you may be able to find jobs that offer reimbursement for future graduate school expenses.
Refinance. Reducing your student loan debt is a great way to help you pay loans off faster, and refinancing could allow you to consolidate student loans, lock in low, fixed rates, reduce monthly minimum payments and/or the term (length) of your loan, and pay less overall. When you originally took out your student loans, you were likely given a standard interest rate assigned to all student borrowers regardless of their financial situation. However, qualifying for more favorable rates and terms through refinancing may depend on several criteria, including your income, credit score, loan amounts, and so on. Be sure to research the pros and cons of refinancing with a private lender, but if you have a reliable income and solid credit history, you might discover that you’re eligible for terms that reward you for your responsible financial habits. You might as well find out if refinancing your student loans could help free up additional money that you could apply to other areas in your budget!

Avoiding Student Loan Identity Theft

Use Safe Internet Connections When you Cyber Monday shop in a cafe or buy Wi-Fi at 30,000 feet, you put yourself at risk for identity theft. Public Wi-Fi connections are full of fellow internet surfers, and they don’t all have good intentions. Though convenient, public Wi-Fi may not have the proper security and encryption measures in place. When a fraudster gains access to your personal information via public Wi-Fi, it’s known as a man-in-the-middle (MITM) attack. Once they’ve gained access, thieves can spy on your internet behavior and steal usernames, passwords, credit card numbers, etc. Needless to say, it’s best to avoid anything on a public network that requires you to log into accounts or make purchases. This includes applying for colleges and student loans. Be sure you’re always working from a safe, trusted internet connection and make sure your device or computer has the latest software installed. Don’t Keep Your Social Security Card in Your Wallet At some point, you’ll likely be asked to share your Social Security number at the doctor’s office, your bank, the Department of Motor Vehicles, or even your job. And because of that, it’s tempting to keep your Social Security card in your purse or wallet for easy access, but doing so can open the door to identity theft. When your SSN lives next to your credit cards and driver’s license, you give thieves everything they need to steal your identity. Instead, keep your Social Security card with other important documents in a personal safe at your house or in a rented safe deposit box at a bank or credit union. Read more about when you should and shouldn’t give out your Social Security number. Be Weary About Who You Share Information With When applying for student loans, work directly through fafsa.gov for federal loans or through reputable financial institutions for private loans. How can you tell if a site is reputable? You should be able to easily find contact information on their website and speak to a real person when you call. Reputable websites also work through encrypted connections, helping reduce the risk of identity theft by sending your data across the internet with additional layers of protection. You can tell if a website is encrypted by its web address: “HTTP” sites are not encrypted while “HTTPS” sites are. If you do find that your identity has been used to take out unauthorized student loans, the below tips can help you get back on track. Recovering from Student Loan Identity Theft If you received a call or letter from a loan servicer warning that your account is past due, despite not having a student loan with that institution, you might be the victim of identity theft. Student loan identity theft might also be discovered during a routine credit check or by a credit monitoring service. Regardless of how you find out, once you do, here’s who to contact:

Contact the lenders that opened the accounts. Their fraud departments can freeze the accounts to prevent any further damage.
Contact the Federal Trade Commission (FTC) to complete an Identity Theft Report. This report will provide a detailed recovery plan and layout the appropriate steps. It will also pre-fill forms and letters you’ll need, saving you precious time.
Contact the police and file a police report. A police report may be needed to help clear things up with lenders, credit agencies or the Department of Education.
Contact the school where the fraudulent account was opened, notify them of your incident and ask for a letter stating that the account is closed.
Contact the three major credit reporting agencies (Equifax®, Experian®, and TransUnion®) and have them place a free fraud alert on your credit report. Doing so lets each one know to take extra precaution before approving new lines of credit. You may also consider a credit freeze, which prevents any new lines of credit from opening until you have it lifted.

Keep An Eye On Things If you haven’t signed up for a credit monitoring service, now is the time. The big three reporting agencies offer these services, as do third-party platforms like Credit Karma®. You can set up alerts to be notified of any new activity tied to your personal information. If you don’t want to sign up for a service, at least do your due diligence by checking your credit frequently. You can get your credit report at no cost every 12 months from each of the main credit bureaus (Equifax, Experian, and TransUnion). Request your report at AnnualCreditReport.com. Remember, fraudsters will stop at nothing to access your personal information, and they’re good at what they do! It’s troublesome to have any aspect of life tampered with, but especially so when it comes to student loan identity theft. It pays to know ways to help protect yourself, and if the unfortunate does happen, how to begin the rebuilding process.

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.

2019-11-08

Student Loans: What are Deferments and Forbearances?

When you graduate from college with student loan debt, you typically have a 6-month grace period before you have to start paying off your loans. Once your grace period is over, however, you may not be in the best position to start paying them, such as experiencing economic hardship. In these situations, you may be able to request a deferment or forbearance that will adjust your loan payments to make them more manageable or delay them altogether.

What is a Deferment?

A deferment allows you to temporarily postpone or stop making student loan payments. You’ll want to be careful about requesting a deferment depending on the type of loans you have, because some will cover the interest during deferment, and some will make you responsible for paying the accrued interest during deferment. For Federal Subsidized Stafford Loans and Federal Perkins Loans, the government will pay interest during the deferment period, while they will not with Federal Unsubsidized Stafford Loans. Also, parents are responsible for paying interest on Federal PLUS Loans while in deferment. There are various reasons why you could qualify for deferment, including:

Experiencing unemployment
Economic hardship
Student enrollment
Graduate fellowships
Rehabilitation training

Technically, you are entitled to deferments – if you qualify for one and submit a request in a timely manner, your loan servicer is required to grant a deferment. However, this doesn’t mean you can stop paying once you submit the request – keep making monthly payments until the request is approved to avoid taking any knocks to your credit score. Once the deferment is granted, be sure to know when it ends, and be prepared to start making payments from that point forward, as that will be expected.

What is a Forbearance?

In the case that you don’t qualify for a deferment, you may have to request a forbearance on your student loans. When in forbearance, you can either make reduced payments or no payments at all for a limited period of time. In almost all forbearance cases you will be responsible for the interest that accrues on your student loan balance. The two types of forbearances are discretionary and mandatory. Discretionary forbearances are up to your loan servicer to grant, but you can request them in cases of financial hardship or illness. For mandatory forbearances, if you meet the eligibility criteria for the forbearance, your loan servicer is required to grant the forbearance. You can request a mandatory forbearance if:

Your federal student loan debt exceeds 20% of your gross income.
You are serving in a medical or dental internship or residency.
You are serving in a national service position for which you received a national service award.
You are performing teaching service that would qualify for teacher loan forgiveness.
You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.

As with deferments, you must continue to make your monthly payments until the request for forbearance is approved by your loan servicer. Going into forbearance will not cancel out or erase any missed payments you have, so if you are in need of a forbearance, it may be better to request it quickly as to avoid any effects on your credit score. Managing student loan payments isn’t always easy. If you’re having trouble making payments on your loan, you should contact your loan servicer immediately and learn about your options. It’s important for them to be aware of your specific situation so they can provide you with the appropriate information and help you avoid defaulting on your loans. If you default, you are not eligible for a deferment or forbearance.

2019-10-29

Student Loan Scams: Voicemail Edition

Robocalls. They’ve become so common and irritating that we rarely answer our phones if we don’t recognize the number. The voice messages these scammers leave range from humorous to threatening – from the “local police” waiting to take you into custody, to a stranger offering cash for your home. A recent string of messages hits particularly close to home for the 45 million U.S. borrowers who owe $1.5 trillion in student loans. These calls claim changes to federal student loans or advertise offers of forgiveness of student loan debt. Some people who find these messages in their voicemail don’t even have student loans. But for the 45 million Americans who do, the offers can be a little too tempting. Student loan debt is a burden that we want to find a way out of and sometimes, what sounds to be too good to be true is in fact that. So much so, that we’re willing to put on earmuffs when it comes to a quick way out. These scammers are after social security numbers, credit card numbers, federal student aid IDs, or for a victim to contribute money to a loan assistance program that (surprise, surprise) has no intention of helping you with your student loans. A reputable company will never ask for any of these things over a voicemail or on the phone. So how are borrowers supposed to know what offers to be wary of? Let’s run down a list of common tactics for student loan voicemail scams.

Student Loan Scam Tactic #1: They Offer to Abolish Your Student Loans

This tactic is just what it sounds like: fraudsters offering to completely do away with your student loan debt. The scam is tricky because there are federal loan forgiveness programs that pay the balance of your loan under certain circumstances, like if you join the military or qualify and meet the requirements of the Public Service Loan Forgiveness (PSLF) program. We’ve outlined how the PSLF program works in a previous blog post. The offer from the scammer usually sounds something like, “we’ll release your student loans for a nominal, upfront fee.” The red flag is the advance payment – something legitimate organizations would never do. It’s actually illegal for companies to make you pay before helping you. This claim is even more suspicious when they offer “quick” student loan forgiveness. In actuality, the Public Service Loan Forgiveness program takes years to complete and includes detailed requirements for qualifying. To put it simply, if you have student loan debt, you must repay that debt. If you are having a challenge repaying your student loans, contact your lender or a reputable resource focused on assisting people in your situation.

Student Loan Scam Tactic #2: They Offer “Exclusive” Access

Some voicemails promote programs for reducing student loan monthly payments or even your total balance as part of an exclusive offer. However, companies who have your real best interest at heart would never make promises or offers without first knowing your personal financial situation.

Student Loan Scam Tactic #3: They Convince You to Act Quickly

These student loan voicemail scams work by telling you to call back “right away” or risk losing your offer. But you should never be pressured into an offer. You student loans will remain subject to your existing agreements with your student loan lender unless you take action to change them, such as by refinancing your student loans with a new lender. Don’t feel pressured to make a choice now. A company can only propose different rates or terms based on your applying for a new program. Take your time and do your research on who is making the offer and determine if they are a reputable organization with experience in student loans and student loan refinancing.

Student Loan Scam Tactic #4: They Use Political Buzz For Power

For borrowers with federal student loans, scammers sometimes claim transitions in presidential administrations have ushered in changes to student loan laws, for example, the switch from the Obama to the Trump administration. Scammers get fuel from the fact that many politicians are currently talking about student loan debt. They believe borrowers will get confused between the different proposals and plans and assume they’ve heard of the offer. Once you’ve given them your data, they have all they need.

Student Loan Scam Tactic #5: They Tell You That You Can’t Do It Without Them

This is the classic scammer line: you need me or else you will miss out on this great opportunity. We hate to break it to those scammers, but there’s nothing that they offer that you can’t do on your own – for free. You can explore lowering your student loan interest rate, negotiate new loan repayment terms, and even try to qualify for PSLF all on your own, without paying a company to assist you.

How Do You Avoid These Scams?

Now that you know what phony offers are out there, there’s one simple way you can avoid scammers: don’t answer the phone and don’t call them back.

If you do answer the phone—and realize it's a robocall—hang up and don’t push any buttons or engage in conversation. This is one situation where you should push manners to the side and get off the line as quickly as possible.
Do your research into who is calling you and reach back out to them through the official phone number from their website if necessary.
Remember, anyone can build a website. Make sure you validate a student loan company is authentic by looking for indicators, such as sufficient user reviews on reputable sites and a listing on the Better Business Bureau.

The U.S. Department of Education has outlined steps you can take to avoid student loan scams and listed companies they’ve taken action against. If you’re looking to consolidate or refinance your student loans for a potentially lower interest rate or new repayment terms, the team at ELFI* can walk you through the entire process and help you decide if it’s right for you.

*Subject to credit approval. Terms and conditions apply. 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.