Student Loans – Everything you need to know before and after!
When it comes to paying for college, career school, or graduate school, federal student loans offer several advantages over private student loans.
Plan the future is something wonderful and should be part of our main concerns.
Along with technology came the reduction of job offers and also the increased requirements of specialization.
Education has never been as important as it is today and it will certainly be even more so in a short time.
In the underdeveloped countries the unemployment rate is very high due to the lack of specialized professionals, large multinational companies need to import specialized people because they do not own in the country.
The Planning for college is very important, it’s not just about our success, but about our family and our nation
A realistic analysis of our budget is key to finding solutions and reducing risk.
Unfortunately not all of us have the conditions to pay for a good education and in this case, it is very important to know all the alternative student loans, as well as tools and devices that can help us:
• Escape student loans
• Choosing the student loans correctly
• Refinance student loans wisely
• Get extra income to pay off your student loans faster
Do not be afraid or insecure, after all it’s about your future, it’s more important than buying a fashionable car or dream trip, keep calm and get it soon enough.
We write worked out this article by following the steps below broadly to help as many people as possible, regardless of which stage you might be involved.
Alternative Student Loans
It’s important for students to seek out alternative student loans before resorting to borrowing. Even if the alternative measures don’t cover the full cost of tuition and living expenses, they will reduce the amount you have to borrow in the end.
1. Apply for Pell Grants
The federal government awards Pell Grants to undergraduate full- and part-time students who have not yet earned a bachelor’s degree. The grant is based on student need as determined by information about personal and family financial status included in the Free Application for Federal Student Aid, or FAFSA. The maximum amount awarded to students was $5,815, as of the 2016-2017 academic year. This money does not need to be repaid.
Undergraduates can qualify for the Pell Grant every year of college for up to six years. Savvy students who qualify for the grant can use it to offset the cost of tuition at community colleges and public universities, which are significantly cheaper than private institutions. Students who choose public education can combine the Pell Grant with earnings from on-campus and off-campus part-time jobs, and family savings when available, to pay for college without student loans.
2. Apply To Multiple Scholarships Every Day
Internet Scholarship Search Sites:
Scholarships can play a significant role in reducing a person’s overall cost of getting a degree. They are non-repayable monetary awards that are given out to assist accomplished people, whether academically or otherwise, with paying for their cost of attendance and other college expenses.
If awarded enough, a student can significantly curb college-related costs or even avoid paying for things like tuition, books, and room and board with money from their own pocket.
The good news is that there are so many opportunities out there for students to receive scholarships.
As reported by Debt.org, “[e]ach year, an estimated $46 billion in grants and scholarship money is awarded by the U.S. Department of Education and the nation’s colleges and universities.”
The report also states that a little more than $3 billion in non-repayable financial aid is awarded annually by private organizations like wealthy families, churches, and non-profit organizations.
A handful of generous scholarships to consider applying to include, the University of Puget Sound’s Matelich Full Scholarship, the Jent Kent Cooke Undergraduate Transfer Scholarship, Grasshopper Entrepreneur Scholarship, the Ron Brown Scholarship for African Americans and the Becas Univision Scholarship for Hispanic Americans.
3. Study free at the Newest Silicon Valley University of Technology
Come to the most promising career of all time: Technology.
The 42.us.org the newest university in Silicon Valley with fields in France, many of those who graduated there work today in large companies such as IBM, Amazon and Tesla. Some have set up their own companies, go to 42.us.org and get to know it, it’s free, but for starters who want to achieve a high level of technology career. @
4. Study at an Online University
Enrolling in an online undergraduate or graduate program is another cost-effective way to get a degree.
Typically, one can study online for a fraction of the cost of attending a traditional university as the cost of tuition is much lower and other expenses like lodging are non-existent.
In the past, there was a stigma attached to those who possessed online degrees, however, that is changing.
A 2013 study conducted by the Babson Survey Research Group found that, “the percent of academic leaders rating the learning outcomes in online education as the same or superior to those in face-to-face instruction had grown from 57 in 2003 to 77% in 2012.”
There are a number of well-known and accredited schools with online programs including Liberty University The largest Christian college in the world and The George Washington University.
5. Join the Armed Forces or exchange for service on campus while enrolled
If you are willing to serve, you can benefit from financial assistance to pay for college from the U.S. Military. One of its most popular tuition assistance programs is the Post 911 GI Bill, which can award eligible military veterans up to 100% of their tuition and fees.
As unbelievable as it seems, a handful of colleges across the United States do not charge tuition. In many cases, such colleges cover the cost of their enrolled students’ tuition with endowment funding. Competition for admissions to free tuition colleges is high, and as such, high school students who wish to have this option should maintain stellar academic records. Students accepted to free colleges can explore options such as Pell Grants, family savings, part-time employment and parent student loans to cover the cost of room and board.
The U.S. Military Academy West Point, the U.S. Naval Academy, the U.S. Air Force Academy, the U.S. Coast Guard Academy and the U.S. Merchant Marine Academy offer free higher education in exchange for continued military service to military members who qualify for admission. Colleges such as Deep Springs, Brea and Alice Lloyd charge no tuition to their students in exchange for service on campus while enrolled. Curtis Institute of Music, the Webb Institute and Macaulay Honors College at the City University of New York charge no tuition to students with exceptional academic backgrounds.
6. Study Abroad
Studying abroad can be fantastic for our lives, beyond academic training, we learn other languages, we know other cultures, we live with challenges and situations that we could never experience living in our country, the result is a much broader and more solid learning load And that consequently can bring us many competitive differentials for our career and life.
Most people think of studying abroad as the summer- or semester-long cultural exchanges in which many college students partake in countries such as France, Spain and Italy. However, a growing number of Americans are applying to colleges across Europe that offer free or reduced tuition rates to all students, including international students.
Public universities in Germany, Norway, Finland and Iceland charge no tuition to any students, and some private European universities are also free. Even when universities in Europe charge tuition, the cost is usually significantly less than it is in the United States. One of the biggest perks of earning a degree in Europe is that most undergraduate programs take three years to complete rather than four. This is a significant benefit for students paying their living expenses out of pocket. Other advantages to earning a bachelor’s degree abroad include learning foreign languages and having the option of getting a job abroad after graduation.
Further, graduate school in the United States typically is cheaper than undergraduate school. This means that students can return home and seek fellowships or assistantships to earn graduate degrees or borrow the bare minimum if needed.
However, earning a bachelor’s degree abroad takes planning. Students should research visa requirements as well as the requirements for working a part-time job abroad as a student visa holder. Those who plan to go this route should also investigate various room and board options, based on their budgets and desired lifestyle while enrolled.
European universities take just over 40 per cent of the places in a ranking of almost 1,000 of the best universities in the world.
The Times Higher Education’s World University Ranking 2016-2017 ranks 980 universities around the world, and just under 400 are universities in Europe.
A UK university takes the top spot in the overall ranking for the first time, and 90 other UK universities appear in the overall ranking.
Germany is the next most represented European country, with 41 featured institutions, many of them in the top 100 universities.
Of universities in mainland Europe, a Swiss institution – ETH Zurich – achieves the highest rank, making it into the top 10 overall and the top 5 within Europe.
The top 10 European universities include UK, Swiss, German and Swedish institutions, but UK universities take most of the spots at the very top.
Institutions were measured on their teaching environment, research environment, citations (research influence), industry income and international outlook – the World University Ranking’s methodology audited independently in 2016.
All About Student Loans
How do I get a federal student loans?
To get a federal student loans, you must first complete the Free Application for Federal Student Aid (FAFSA®).
See our article: Guide college financial aid, FAFSA and CSS Profile
If you apply for financial aid, your school will likely include student loans as part of your financial aid package. It’s important to understand what types of student loans you are offered. Generally, there are two types of student loans:
Federal student loans: These student loans are funded by the federal government.
Private student loans: These student loans are nonfederal student loans, made by a lender such as a bank, credit union, state agency, or a school.
Federal student loans are:
Direct Subsidized student Loans and Direct Unsubsidized student Loans;
Direct PLUS student Loans (for graduate and professional students or parents); and
Federal Perkins student Loans.
What are the differences between federal and private student loans?
Federal student loans include many benefits (such as fixed interest rates and income-driven repayment plans) not typically offered with private student loans. In contrast, private student loans are generally more expensive than federal student loans.
The chart below provides a summary of the differences.
Federal Student Loans
Private Student Loans
|You will not have to start repaying your federal student loans until you graduate, leave school, or change your enrollment status to less than half-time.||Many private student loans require payments while you are still in school.
|The interest rate is fixed and is often lower than private student loans—and much lower than some credit card interest rates. View the current interest rates on federal student loans.||Private student loans can have variable interest rates, some greater than 18%. A variable rate may substantially increase the total amount you repay.|
|Undergraduate students with financial need will likely qualify for a subsidized student loan where the government pays the interest while you are in school on at least a half-time basis.||Private student loans are not subsidized. No one pays the interest on your student loan but you.
|You don’t need to get a credit check for most federal student loans (except for PLUS student loans). Federal student loans can help you establish a good credit record.||Private student loans may require an established credit record. The cost of a private student loans will depend on your credit score and other factors.|
|You won’t need a cosigner to get a federal student loans in most cases.||You may need a cosigner.
|Interest may be tax deductible.||Interest may not be tax deductible.|
|Student Loans can be consolidated into a Direct Consolidation Student Loans. Learn about your consolidation options.
|Private student loans cannot be consolidated into a Direct Consolidation Student Loans.|
|If you are having trouble repaying your student loans, you may be able to temporarily postpone or lower your payments.||Private student loans may not offer forbearance or deferment options.|
|There are several repayment plans, including an option to tie your monthly payment to your income.||You should check with your lender to find out about your repayment options.|
|There is no prepayment penalty fee.||You need to make sure there are no prepayment penalty fees.|
|You may be eligible to have some portion of your student loans forgiven if you work in public service. Learn about our student loans forgiveness programs.||It is unlikely that your lender will offer a student loans forgiveness program.|
|Free help is available at 1-800-4-FED-AID and on our websites.||The Consumer Financial Protection Bureau’s private student loans ombudsman may be able to assist you if you have concerns about your private student loans.|
Private Student Loans – Facts You Didn’t Know About
Taking on student loans debt can be a good long-term investment for some professions, but not all student loans debt is the same. Students typically have two main options when it comes to borrowing money: a federal student loans or a university payment plan. What many have started to consider as a third option, is a private student loans from a bank or credit union. With the current student debt total at $1 trillion, it’s a topic worth knowing a little bit about. If you’re considering a private studset loans, here are a few things you need to keep in mind. If you already have one, take a look at this list and make sure you know the terms of your agreement.
You’re Going To Pay More In Interest Rates And Fees
A lot of private student loans market themselves as low-interest student loans you can use for your education. The problem is that most of those advertised rates are only for people with impeccable credit scores. The majority of students who receive private loans don’t get great interest rates because they don’t know how to build a better credit score. In fact, less than 5% of borrowers receive the lowest rates for private student loans.
Those who do qualify for the lowest interest rate, and especially those who don’t, should check the fine print to make sure they’re not getting a variable interest rate that may increase in a few years. Many private student loans are set up with a variable interest rate that will increase over time, and you could end up spending a lot of money to pay for a small student loans. Compared to federal student loan programs, which have fixed interest rates, you may end spending a lot more money than expected to pay back that private student loan.
Can’t Be Canceled or Forgiven
Unlike federal student loans, there aren’t very many options for having your private student loans canceled or forgiven. For some federal student loans, if you work in the non-profit public service industry for 10 years you may qualify for federal student loans forgiveness. Not so for private student loans. Don’t expect any options for private student loans to be canceled or forgiven. And if you end up with a very big debt to pay, bankruptcy may have to be considered.
If You Lose Your Job, You May Be on Your Own
The current economic situation in the U.S. and throughout Europe is still unstable. People who lose their jobs, have lost their jobs or do not get jobs out of college, don’t have as many options when it comes to repaying private student loans. Federal student loans offer student loans deferment for financial hardships, but you won’t get the same options with a private student loans. You may be able to speak about the terms directly with the bank that owns your private student loans, but the bank is under no obligation to work with you to renegotiate or lower your monthly payments.
Income-Based Repayment Not an Option
Along the same lines of financial hardship, an income-based repayment (IBR) option is available for federal student loans, but not private student loans. An IBR plan allows individuals to make monthly payments based on how much money he or she is currently earning. Each year, the IBR number is set based on your annual income from the previous year. The more you make, the more you’ll pay, but after 25 years of payments, the student loans is forgiven no matter how much is left. If you have a private student loans, you won’t have access to this type of repayment plan.
If You Have to Get a Student Loans, Look at Your Options
If you have no other option than to get a private student loans to pay for your education, consider applying for a student loans from different companies and then compare their repayment plans. Often, it’s difficult to know what interest rate you’re going to get, what the fees will be and how your repayment is structured until you actually apply for the student loans. By applying for several student loans, you’ll be able to compare rates and fees and make the best choice for you. However, know what credit inquiries can do to your credit score before applying to a high number of companies.
How to Create a Plan to Deal with College Debt
In order to deal with the student debt issue, it can be a wise choice to establish a plan for repayment. This can be a daunting exercise as all student loans are not created equal and it is not just a simple decision about refinancing to a lower rate. Below we present out some of the parameters that need to be addressed to identify what kind of student loans you have and then some of the options available for repayment.
1. Take Advantage of Your Grace Period
Depending on your student loans type, your lender may have granted you a grace period after you graduate (or stop attending the college) where you don’t need to make any payments towards your loan. Avoid the tempting option of simply ignoring your debt during this period. If you still have the luxury of a grace period, now is the time to fully understand your loans, make a game plan and if possible, start making those payments you’d normally be making anyway. For example, if your loan payment is going to be $250 per month, take that $1,500 at the end of six months and apply it towards your loan. Not only will it reduce your loan, but you’ll already be in the habit of putting that $250 aside.
2. Understand Your Loans
Even if your grace period is long gone, the first step in dealing with your student loans is to really understand what you’re dealing with. (For more, see: The World of College Rebate Programs.)
Federal vs. Private Student Loans Costs
Federal student loans – There are two major sources for student loans, the federal government and the private sector. Federal student loans should be every college student’s first choice. Federal loans can have lower interest rates than their private sector counterparts, and offer much more student-friendly repayment options. Many federal student loans also offer deferment plans, which allows for a grace period following graduation before the borrower must begin repayment. That being said, not all college-bound students will qualify for a federal student loans . Federal student loans are determined on the basis of financial need and not all students will meet the criteria. Even those students who do qualify for federal student loans may find that they are still left with a significant amount of unmet need. That’s where the private, or alternative, student loans comes into play.
Private student loans – Unlike federal student loans, private student loans are decided solely on the basis of credit history. This can present a problem for many college students, as they may have little or no credit history to show for themselves. Many private lenders will allow students to engage a cosigner, either a parent or a guardian with a solid credit report, in order to secure the necessary loans for college. Private student loans come at a higher cost than federal loans. They typically have higher interest rates, application fees, penalties for early repayment, and much more restrictive repayment options. While private lender student loans help thousands of students every year find the money they need for college, they can place a significant burden on borrowers.
Students are advised to pursue federal student loans before considering any private lender student loans agreements. Unfortunately, due to a lack of proper financial aid guidance, many students turn to private lender student loans before exhausting all of the federally supported financial aid opportunities. Before taking on any high cost private students loans, be sure to apply for any government sponsored financial aid programs for which you may be eligible. (For related reading, see: Using 529 Plans to Save for College.)
It’s easy to turn your brain off, make your minimum payment (if you can even afford it) and go on. But to actually make an impact, you also need to know how your student loans works. Here’s how to understand your student loans debt.
Step 1: Find your student loans
It would seem crazy to someone that never had a student loans, but yes, it is very possible and extremely common to not be aware of all your student loans after graduation. Since you can’t go back in time to tell 18-year-old you to keep track of every detail of each student loans you take out, you’ll have to put in the leg work now. For starters, check the National Student Loans Data System to find any federal student loans. To check what you owe to private lenders, contact them directly. Another option is to order a free copy of your credit report to see who your lender is.
Step 2: Understand your payment options
Some student loans offer the chance to switch to a payment plan based on what you’re earning. If you’re unable to make your payments at all, you can apply for a temporary deferment.
Step 3: Familiarize yourself with each student loans details
If you’re dealing with multiple student loans, as many people are, then try to first tackle the student loans that you’re paying the most interest on every month. Besides the interest rate of each loan, understand what the minimum payment will be and which loans would qualify for things such as a deferment, student loans forgiveness, and a better payment plan. (For more, see: The Advantages of Automating Your Financial Life.)
3. Choose Your Best Payment Plan
As I mentioned above, you could have the option of choosing a better payment plan, such as an income-based repayment or pay-as-you-earn. These options give you a more manageable minimum monthly payment based on what your current income is. You may also wish to explore student loans consolidation if you are having difficulty keeping track of multiple student loans at once. (For related reading, see: How to Use Your Credit and Debit Cards Safely.)
Let’s examine the menu of repayment terms available with many student loans. Keep in mind that arrangements to pay smaller amounts will cost more in the long run.
Monthly payments often can be lowered for students entering jobs with low salaries or for parents who may still be paying tuition bills for other siblings.
Income-Based Repayment (IBR). With IBR, payments are capped at 15% of the borrower’s discretionary income and can be as low as zero for those below 150% of the federal poverty level.
Any excess interest is capitalized, with no maximum limit on negative amortization, but any remaining balance is forgiven after 25 years.
This was cut to 20 years and a 10%-of-income cap for new borrowers starting July 1, 2014. In order to qualify for IBR, the borrower must have a “partial financial hardship.”
Pay As You Earn (PAYE). Under PAYE, a student loan borrower’s monthly payments are capped at 10% of discretionary income.
Again, excess interest may be capitalized in some circumstances (but is capped at up to 10% above the original principal amount).
Also similar to IBR, if the borrower still has a balance after 20 years of payments, the balance is forgiven. PAYE is a more recent program and older student loans may not be eligible.
Revised Pay As You Earn (REPAYE). REPAYE has terms similar to PAYE, where monthly payments are again capped at 10% of income, and it again allows forgiveness after 20 years (or 25 years for graduate school student loans).
However, negatively amortizing interest charges with REPAYE accrue at only 50% of the unpaid interest and capitalize only if you leave the REPAYE program.
Public Student Loans Forgiveness (PSLF). One challenge to IBR, PAYE and REPAYE is that any student loans balances that are forgiven are taxable income to the borrower at that time. However, the PSLF program, which can apply on top of any of these programs, turns the forgiven loan from being taxable to non-taxable, and loan forgiveness periods can be as short as 10 years.
However, PSLF is available only to those who work full time in the public sector, which generally means working for the government, a 501(c)(3) charity or certain other qualifying non-profit organizations.
Online Private Repayment Options
Cyber lenders may offer better rates on some student loans, but you may still face higher payments if you refinance fixed-rate student loans into variable-rate ones.
This is especially true if your credit score drops or you lose a job. Remember that it may not make sense to eschew federal repayment options to refinance into a private student loans – even if the rate and monthly payments are lower. (For more, see: Best 5 Money-Saving Tips to Get out of Debt.)
Once a client leaves the federal program by choosing private financing, the flexibility of repayment options is lost, as is the likelihood that certain kinds of student loans may be forgiven.
Here are some online private lending providers:
Citizens Bank: Current rates range from 2.8% to 7.9%.
CommonBond: Offers phone support. Rates range from 2.1% to 7.5%.
DRB: Rates range from 2.1% to 3.5% with programs focused on professional/graduate student loans repayment.
Earnest: The portal offers a dashboard for monitoring student loans and offers rates from 2.1% to 3.5% APR.
LendKey: Also refinances home student loans. Student refinancing rates range from 2.1% to 3.5%.
SoFi: A broad-based portal that goes beyond student debt. Rates range from 2.1% to 7.5%.
4. Deduct Your Student Loans Interest
Once tax season rolls around, don’t forget to deduct your student loans interest. You can reduce your taxable income by up to $2,500 on any interest you’ve paid for that tax year. Your lender should send you this information, but you can also request it or get it online. It may not make a huge difference, but any little bit helps.
5. Get Help At Work
A number of companies, including Fidelity Investments and PwC, are offering help to pay down student debt. This is becoming a more mainstream perk and is worth looking into with your current employer and keeping in mind if you are looking for a job. While only about 3% of employers are offering this assistance now, it will gain steam as companies work to attract and retain Millennial workers carrying heavy debt loads.
This list does not cover every option available and there are more considerations regarding refinancing student loans. The intent was to provide a road map and plan of attack. The worst thing to do with college debt is to ignore it. It will damage you credit score and make future debt management even more difficult.
Should I Refinance My Student Loans?
You might get a better interest rate, but beware these risks.
Opportunities for student borrowers to get new terms on their debt have surged in the past few years. But there’s still plenty of confusion about who qualifies for refinancing and whether it’s a good idea.
There is no way to refinance your federal student loans within the federal system. So if you refinance, you forever give up access to certain benefits available only to federal student loans borrowers—a warning you’ll hear stressed by just about every financial planner and student loans expert.
“My big fear is that people are attracted by a low interest rate and saving on their monthly payments and aren’t paying attention to those benefits they’re giving up on the back end,” says Debra Chromy, president of the Education Finance Council, an organization that represents state and nonprofit lenders.
For example, you’ll lose access to the federal government’s income-driven repayment plans. These plans, which are a protection in case of a pay cut or job loss, set your monthly bill according to your salary and offer student loans forgiveness after at least 20 years. You also won’t be eligible for public service student loans forgiveness, under which government and nonprofit workers can have their outstanding debt discharged after 10 years of payments. And you’ll likely be ineligible for federal benefits introduced in the future as well. (The Bank of North Dakota has a good overview of these and other federal benefits.)
Once you’ve examined the risks, here’s how to decide if refinancing makes sense for you.
Will You Even Qualify?
Refinancing so far has largely been available only for a tiny slice borrowers—those with super-prime credit, lucrative degrees, six-figure salaries, and large debt loads. In fact, one of the biggest critiques of well-known refinancing companies, including SoFi and CommonBond, is that they cherry pick the absolute safest borrowers.
The borrowers who could really benefit from refinancing, those who are solidly middle class, are still being denied even with co-signers, says Adam Minsky, a lawyer in Boston who specializes in student loans.
Yet as startup lenders have grown more comfortable with the level of risk they can take on, and more lenders enter the refinancing space, a wider population of borrowers is starting to be accepted for refinancing, says Stephen Dash, who founded Credible, an online student loans marketplace where users can compare offers from multiple refinancers.
“Refi is not just for people with monster debt and monster incomes,” he says. “We’re seeing people refinance student debt that’s around the same size as their salary.”
For borrowers without much credit history—essentially all 20-somethings who recently graduated—you’ll need to spend several years making on-time payments and building up your credit before you’ll be eligible for competitive rates, says Mark Kantrowitz, a financial aid and student loans expert.
Where Should You Refinance?
The Wall Street Journal reported last summer that the five major refinancers had originated more than $5 billion in student loans since 2012. That sum has at least doubled since then. SoFi. the first company in the industry, has refinanced $8.35 billion in student loans, and the newer Earnest recently announced it had surpassed $1 billion. Plus, several state agencies have joined the refinancing market since last November.
Borrowers can now refinance their student loans through traditional banks, such as CitizensBank; younger fintech startups, such as SoFi and Earnest; or 11 state student loans authorities. (They are: Alaska, Connecticut, Iowa, Kentucky, Louisiana, Massachusetts, Minnesota, New Hampshire, New Jersey, Rhode Island, and South Carolina.)
Which type of lender will offer the best terms depends on a borrower’s priorities and finances.
At a bare minimum, all lenders will evaluate your income and credit history. Some also consider your type of degree and industry, your savings behavior, and where you went to college. Many lenders require a minimum debt of $10,000, but CommonBond, for example, accepts debt loads ranging from $3,500 to $500,000. Most lenders offer both fixed rates that are locked in for the entire repayment term and variable rates than can change multiple times during the repayment term.
State student loans authorities offer terms that are usually competitive with private companies, but they also have a mission to increase borrower knowledge, Chromy says. Profits from refinancing go toward supporting local outreach activities to help state residents save and plan for college, and that can be a nice bonus for borrowers when deciding among companies, Chromy said.
Some of the private refinancers are very selective in who they offer the best rates, so if you’re not eligible for their programs or if you aren’t offered a good rate, you may do better with a state authority.
The Massachusetts Educational Finance Authority’s traditional lending programs— student loans designed for families to fill the gap left by federal student loans—serves clients with a range of credit scores, Thomas Graf, the authority’s executive director, says.
“That’s the goal of what we’re trying to do (with refinancing), too, ” he says. “Be available for everyone.” Of course, there are limitations to that, since the student loans are based on credit quality, but generally a credit score of at least 670 (out of 850) is enough to qualify for MEFA’s student loans.
Ultimately, you’ll need to shop around to see which lender offers you the best terms. Credible and Overture Marketplace both provide borrowers a platform to compare several individualized offers at once. It makes sense to start researching your options shopping with these sites, but neither includes every lender that offers refinancing, so there’s a chance you could get a better rate offer from a company outside those marketplaces.
What is Your Goal in Refinancing?
Lenders promote refinancing primarily as a way to save money, advertising lifetime savings of $14,000 or more. But there are few other reasons borrowers may decide to refinance.
Many borrowers are looking to reduce their monthly payment by lowering their interest rate and extending their term, says Noel Simpson, deputy director of the Rhode Island Student Loans Authority, or RISLA. (Note that there is a way to lower your payment by extending your term in the federal system, but not to lower your interest rate.)
Others want to keep their monthly payment amount the same but pay more toward their principal—and thereby pay off their student loans faster—by reducing their interest rate. Sometimes borrowers want to simplify their monthly bills by combining multiple federal and private student loans into one student loans. And often borrowers get offers that do all three: lower their monthly bill, lower their interest rate, and simplify their payments.
What Kind of Term Should You Look For?
Being eligible for refinancing, of course, doesn’t tell you much. It’s the terms you’re offered and whether they’re an improvement over what you have now that matters.
“Don’t get caught up in anything that says ‘rates as low as’ because you may not qualify for that,” Chromy cautions.
In general, borrowers with graduate PLUS student loans or parent PLUS student loans stand to save the most, since the interest rates on those student loans have been close to 7% or higher in the past decade. Undergraduate student loans, on the other hand, have carried interest rates lower than 5% in recent years, which means it will be nearly impossible for lenders to undercut your rate.
You’ll generally have the option of choosing a variable interest rate, meaning your monthly payments will change during your repayment period based on the market interest rate. Variable rates start as low as 2%, but market rates remain near historic lows, so if you take a variable rate now, be prepared for it to increase in the coming years. Generally, variable rates are recommended for borrowers who can pay off their debt quickly—in a period of a few years or less.
Don’t automatically be swayed by a lower interest rate. Instead, pay attention to how much that lower rate will save you over the life of the student loans.
A borrower with $100,000 in Graduate PLUS student loans from about five years ago when interest rates were 7.9%, for example, could save about $110 on her monthly payment by getting a 2 percentage point reduction while keeping the length of her repayment term the same. Terms mostly range from five years to 20 years, and interest rates rise as the length of the term grows. You can use online calculators, like this one from NerdWallet, to ballpark your own savings.
Finally, lenders may additional individual features that could make them a better fit for you, and this is where you’ll see the most diversity in offerings.
RISLA’s benefits, for example, are rare in that they include a income-driven plan similar to the ones offered by the federal government for borrowers who are struggling financially. Earnest boasts a mobile app, in-house student loans servicing, and a unique pricing philosophy that can save you money on interest. You can choose your monthly bill and the corresponding repayment length and interest rate. So if your budget will accommodate spending $315 a month toward student loans, and that means you’ll pay off your debt in 11 years and 7 months, you can choose that as your term. SoFi, on the other hand, has a variety of small perks for its borrowers, which it calls “members,” including career support, job search help in the event of a job loss, and access to wealth advisers.
Student loans and millennials out of economy
Millennials are delaying just about everything, from buying their first car or home to getting married and having kids. Student debt is frequently cited as a reason for the delays—and new research suggests those student loans may also lead young people to delay retirement three or four decades down the road.
The survey turned up a variety of other costly distractions associated with student debt:
51% of those with student loans say debt is ruining their quality of life, vs. 28% of those without these student loans.
54% of those with student loans spend time at work dealing with financial issues, vs. 47% without student loans.
31% of those with student loans are worried about paying their bills, vs. 20% of workers without student loans.
56% of those with student loans are worried about saving for the future, vs. 41% of those without the student loans.
Only 27% of those with student loans say they are financially comfortable, vs. 43% for those with no student loans.
Such findings are why student debt surfaced as an issue in the presidential campaign. Both candidates have characterized these student loans as choking the economy; they want to make them more affordable and help those with student loans satisfy their obligations quicker.
Student debt is also behind financial wellness and student loans repayment programs becoming a staple in the benefits packages at large employers.
Serious delinquencies are rising despite the sharp drop in unemployment over the past year and a major effort by the Obama administration to enroll borrowers in programs that cut their monthly payments. The default on other types of debt, such as credit cards and mortgages fell. And the short-term standards on student loans have declined over last year.
The most recent figures highlight how student debt has tripled in the last decade, to $ 1.19 trillion, according to the Federal Reserve Bank of New York-quickly became a crushing weight for more Americans.
Students’ Alternative Service Break Experiences Bring Valuable Lessons on Life, Learning and Purpose
Morgan Wilkins chose to spend her 2015 Spring Break not on the beaches of Fort Lauderdale but learning generations-old weaving techniques in Guatemala through NC State’s Alternative Service Break (ASB) trip program. This is a unique service-learning experience in which students engage in direct service to a community, while being immersed in the culture and customs of that community. Teams are led by student team leaders and accompanied by faculty advisors. Throughout the trip, team members participate in a variety of cultural, educational, recreational and reflective activities to enhance their service experience.
Students volunteer across the country and around the globe. Morgan, a Fashion and Textile Design major, chose to travel to Guatemala with a 16-person team who focused on gender issues within the area. She shares thoughts on her experience in her own words:
Guatemala was one of the best experiences of my life, to say the least. On this trip I learned so much about myself but I also learned much more about how textiles is deeply ingrained in the Guatemalan culture. I was able to see up close hand-weaving techniques that I have never seen before. I was even able to interact with the beautiful Guatemalan women who have passed these techniques down through the generations and could hear many stories about the reasons why this craft is so cherished in their culture.
While being here I also gained insight on the ways to incorporate sustainability into everyday practices of textile design. This was something that I haven’t learned much in an academic setting and is something that should definitely be ingrained more in the fashion industry. Thanks to the Guatemala ASB trip I was able to broaden my horizon on issues that are constantly pushed to the back burner in society. Now, design is much more than just creating something “beautiful” but is more about creating something that has a meaning and purpose behind it. I am able to showcase both of my passions in a much more innovative way because of this amazing trip. I can incorporate my passion for fighting against social injustices into my designs while sparking controversy and making people think when seeing my designs. I am so grateful that I was able to go on this trip and be further shaped and matured as a designer.
How millennials can pay off student loans debt quickly
1. Create a plan for yourself
Whenever you’re trying to achieve success, the first thing to do is to create a plan. This plan will help you clearly see what your goals are and the steps you need to take to achieve them. Start with how long you plan on taking to pay of your student loans. Once you’ve come up with a realistic date, decided what you lifestyle choices you may need to change to reach that goal. Will you have to create a new budget? Take up a second job? Creating a plan will help you pay off student loans debt.
2. Tidy up your budget
If you’re in need of money, but don’t foresee an increase in your income, the best thing to do is cut down your expenses. Take a minute to think about all of your monthly expenses, and differentiate wants from needs. Track all your expenses in a budgeting tool like ionManage through iontuition. Do you need the extra cable channels each month? Or to go out to dinner once a week? Adopt a frugal lifestyle and tailor your budget to that. Keep in mind that this is temporary, and the quicker you are able to pay off your student loans, the quicker you will be able to indulge in other things.
3. Use technology to your benefit
The offers Internet hundreds of small jobs that pay decently well. It may not seem like a whole bunch of money but every dollar counts. Online jobs can vary from freelance writing to surveys. You just have to prepare to do some research!
4. Make the larger payments
Make student loans your first priority. Every paycheck you get, take as much money out as possible and use it to pay off your student loans. In the moment, this may not seem like the best thing to do, but in the long run it is. Larger payments equates to less interest that you will pay, and believe me interest adds up quickly.
5. Don’t look for instant gratification
Many people go into situations with the intentions of finding instant gratification. That mentality won’t work for this situation. With student loans, you have to be prepared to make small steps that will work towards the overall larger goal.