Is Refinancing A Good Idea It Might Be If
Youre looking for an opportunity to pay off your loan faster or lower your monthly payment
A new loan with a lower interest rate can decrease your monthly payment and/or allow you to pay off the loan faster. If you’re looking for more money in your budget today, you can refinance your student loans for a longer period of time spreading out your payments can help you reduce your monthly bill.
Your current interest rate is greater than 4%
If your private or federal student loans have an interest rates of 4% or higher, refinancing will likely save you money. Parents and people with grad-school loans can also save money by refinancing PLUS loans, which have higher interest rates than other federal student loans.
If income-based repayment options are not working for you
Federal income-driven repayment plans can be an effective way to lower your monthly payments. However, they can also make it harder to achieve progress because most of your monthly payment is applied to interest rather than principle. Lowering your interest rate can help you make a bigger dent in your balance faster.
If you dont qualify for student loan forgiveness
If you want to release a cosigner
This Is A Prime Time For Refinancing
With the federal forbearance program set to expire at the end of January and interest rates expected to stay low, refinancing could be a smart money move to make in 2021. Refinancing into a low fixed rate now could save you money in the long term, especially if you took out your loan when rates were high.
Just keep in mind that refinancing your federal student loans means that you will no longer be able to take advantage of income-based repayment plans, student loan forgiveness and any additional federal forbearance periods.
When Could Student Loan Rates Bottom Out
The government sets new annual rates on federal education loans every July 1 based on the 10-year Treasury note auction in May, plus a margin.
The current rate is 4.53 percent for undergraduate Stafford loans, 6.08 percent for graduate Stafford loans and 7.08 percent for PLUS loans.
Kantrowitz says that rates for those loans could drop to 3.2 percent, 4.7 percent and 5.7 percent, respectively. Those predictions are based on the most recent 10-year Treasury note auction. They also assume that the Federal Reserves recent half-point rate cut yields a similar reduction in interest rates as comparable periods in previous years.
But these are predictions. There are a lot of factors that could change the outlook on student loan rates.
One key question, notes Kantrowitz, is whether the markets will become calmer in the next three months. If the market turmoil abates, he says, actual interest rates might be higher than expected.
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Our Top Picks For Best Student Loan Refinance
- PenFed – Best Credit Union
- Laurel Road – Best Loan Consolidation for Medical Students
- Earnest – Best for Customizing Loan Payment
- Splash Financial – Most Affordable Loan Payment Options for Medical Students
- Credible – Best Student Loan Marketplace
- Refinance parent PLUS loans under your name
- Deposit $5 to open a membership account
- The estate is still responsible for the loan if the borrower dies
Pentagon Federal Credit Union is the second-largest credit union in the nation that offers student loan refinancing. They offer fixed- and variable-rate options for borrowers â students, parents, and couples â refinancing up to $300,000 in private or federal student loan debt, with loan payment terms ranging from five to 15 years.
With PenFed, married couples can file a loan application to refinance their student loans together.
- The spouse with the highest degree should apply as the primary applicant to ensure the lowest interest rates.
- Unlike traditional refinancing, only one person needs to have completed a bachelorâs degree or higher to refinance through PenFedâs Couple Loan.
- The annual income requirement ranges from $42,000 to $50,000, depending on the loan amount and whether there is a cosigner or not.
As a member of PenFed, you will gain access to member discounts, an advice center, and financial offers.
Your eligibility requirements as a resident are based on your:
- monthly debt payments
- income projections at the end of your training period
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Am I Sure I Will Not Be Going For Public Service Loan Forgiveness
PSLF;is a program where any remaining direct federal student loans are forgiven tax-free after you make 120 on-time monthly payments in a qualifying program while working full-time;for a qualifying employer.
If you’re absolutely positive that working at a 501 and going for PSLF is not in your future, then you can consider refinancing federal loans. If you’re not sure, don’t refinance!!
Refinance or PSLF?
- If you’re sure you won’t work at a 501 and going for PSLF is NOT in your future; ; Refinance
- If there’s a chance you will work at a 501; ; Don’t Refinance
- Debt-to-income ratio of 1.25 or lower; ; Refinance
- Debt-to-income ratio of 1.25 2, run the numbers on refinancing vs PSLF. The longer your training , the better PSLF is.
- Debt-to-income ratio of 2 or higher; ; PSLF
- Weigh the risk of not being awarded PSLF
How Long Will It Take To Pay Off My Student Loan
The standard repayment period for a federal student loan is 120 months .;Repayment terms for a private student loan vary, depending on the lender. But, private lenders generally do not offer the same flexibility and repayment options that are available with federal student loans.
For example, borrowers with more than $30,000 in federal student loans may opt for an extended repayment period of up to 25 years. Federal borrowers may also qualify for an income-driven repayment plan, which could extend the loan term to 25 years.
Interest rates dont affect the length of your loan, as the term is based on the type of repayment plan you have, such as a standard repayment plan, an extended repayment plan or income-driven repayment plans.
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Your University/college And Course
First and foremost, your university or college must be ‘recognised’ or ‘listed’. This is a lot less complicated than it sounds, as in reality most unis and colleges are covered.
In addition to this, the course you’re enrolling on must fall under the list of qualifying courses supplied by the government. Again, most undergraduate courses are recognised and eligible for funding, but there are some different criteria if you’ll be studying part-time.
Students on most courses at most unis will be eligible for a Maintenance Loan, but just to make sure, head over to this page on the government’s website for the full list of criteria.
Start Applying And Find The Lowest Rate
If you use these links and save money, wed love to know about it. Click on this link to drop us a note.
Please share these deals with your friends who are thinking;about;refinancing.
Maybe theyll take you out to dinner with part of the bonus. Better yet, maybe they could put it to their principal and get out of student loan debt even sooner!
Other questions? Contact us:
Disclosures
1Commonbond:;if you refinance over $100,000 through this site, $500 of the cash bonus listed above is provided directly by Student Loan Planner®.;Commonbond disclosures.
2Earnest:;If you refinance $100,000 or more through this site, $500 of the $1,000 cash bonus is provided directly by Student Loan Planner®. Rate range above includes optional 0.25% Auto Pay discount.;Earnest disclosures.
3Laurel Road:;If you refinance more than $100,000 and Student Loan Planner® receives credit, we will provide a $500 cash bonus directly to you. If you are a member of a professional association, Laurel Road might offer you the choice of an interest rate discount or the $300, or $550 cash bonus mentioned above. Offers from Laurel Road cannot be combined. Rate range above includes optional 0.25% Auto Pay discount.;Laurel Road disclosures.
4Elfi:;If you refinance over $150,000 through this site, $500 of the cash bonus listed above is provided directly by Student Loan Planner®.;Elfi disclosures.
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When Should You Refinance Your Student Loans
Here are a few scenarios where refinancing your student loans could be the right move:
-
You can qualify for a better interest rate, which will save you money on your loan
-
You need a lower monthly payment that fits more comfortably in your budgetng
-
You have multiple student loans and want to combine them to simplify your repayment
-
You have private student loans, so wont lose any federal benefits by refinancing
Ultimately, youll have to decide whether refinancing your student loans is a good idea depending on your individual circumstances and financial goals.
Learn more: When to Refinance Student Loans
Start Putting Together A Plan Now
Due to the pandemic, payments on most federal student loans are suspended through September 30, 2021. But the experts say you should start putting a plan together now for when student loan payments resume.;
Make a plan now, because loan servicers will be overwhelmed in October, says Taylor, referring to 40 million student loan borrowers who will begin repayments at the same time.
Private student loans arent eligible for the COVID-19 suspension of payments, but there are ways to make private student loans more manageable. If youre a private student loan borrower, be sure to get ahead of any financial challenges by calling and requesting to refinance or modify your loan. With rates at historic lows, now is a great time for private student loan borrowers to refinance before rates go up again.;
Here are five steps you should take when developing an action plan for your student loans:
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Federal Student Loan Forgiveness
In some instances, you may qualify for forgiveness on some or all of your federal student loans. Loan forgiveness is possible under a few specific circumstances, including:
Public Service Loan Forgiveness If you work for the government or a qualifying nonprofit, you may be eligible to receive some form of loan forgiveness.
You have to make 120 qualifying on-time payments on the loan and generally work full time for the organization. Unfortunately, many applicants find the process of applying for public service loan forgiveness challenging, and not all non-profits or government work qualify.
Teacher Loan Forgiveness , Teachers who work full-time for five years in a qualifying low-income school are eligible for forgiveness on their federal loans. If you qualify for forgiveness, you may be eligible for up to $17,500 on your Direct Subsidized and Unsubsidized Loans.
These student loan forgiveness plans are only for federal student loans, not private student loans.
The Public Service Loan Forgiveness program has a strict application process that requires a lengthy commitment from applicants. November 2020 April 2021 data shows that nearly 98% of forms did not meet requirements. Pursuing federal loan forgiveness might require considerable attention to detail as there are many program requirements that must be met in order to get approved for loan forgiveness.
Benefits Of Refinancing Your Medical School Loans
En route to debt elimination, most professionals should take advantage of the ability to refinance their debt with a private company. It is usually a no-brainer , because you can lower your monthly payment and the amount of money you owe over the life of the loan, in addition to paying it off quicker.
Eliminating your student loan debt at the beginning of your career will increase your happiness and speed your way to financial freedom, allowing you to take advantage of future opportunities, both professional and personal.
You Save a Ton of Interest
If you have $300,000 in student loans at an average rate of 7% and refinance that to 2.5%, you will spend $13,500 less in interest in the first year alone. That is $13,500 that can go toward principal instead of interest. The same monthly payment that would pay off a 7% loan in 20 years pays off a 2.5% loan in less than 10 years. A 10-year loan becomes a 6-1/2-year loan. A 5-year loan goes away in less than 4.
You Get Cash Back Now
As if saving tens of thousands of dollars in interest isn’t enough, as a little extra icing on the cake WCI has negotiated a special deal for you with each of the main refinancing companies! When you refinance, you get some money back . If you’re smart, you’ll throw those dollars saved into paying off your loans.
You Get Better Service
You Get a Quick and Easy Way to Make Money
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How Much You Need To Repay
Verify your loan or line of credit contract to figure out the following:
- the total amount you owe
- the interest rate that will be applied to your debt
- how youll repay your debt
- how much youll pay
- how long it will take to pay back your debt
Contact the organization that provided your student loan or line of credit if you dont have the information listed above.
Your Loan Term Affects The Amount Of Student Loan Interest You Pay
Your interest rate is one of the major factors determining how much you pay back on your federal or private student loans. But the length of time you take to repay your loan also makes a big impact.
While repaying your loan over a longer time allows you to have lower monthly payments, this approach means youll pay much more in interest. You can use our student loan term comparison calculator to estimate how loan terms could affect the total amount youd pay. Weve done this for you below with a $28,000 loan at 5% interest to showcase how much repayment periods matter.
As you can see, the longer you hold the loan, the more itll cost. Although the five-year plan comes with much higher monthly payments, following the 25-year plan will cost you an extra $17,402 in the end.
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What To Know Before Refinancing Your Student Loans
Refinancing private loans almost always makes sense for borrowers who can qualify for a new loan at a lower rate. The application process can be completed online and there are often no origination fees or upfront costs. And no borrower protections are typically lost since loans are just changing from one private lender to another.
However, it’s important to consider the reputation of the lender and the new loan terms. Extending the repayment timeline can raise total costs, even if the interest rate is lower, while a shorter timeline means higher monthly payments. And some lenders offer better customer service than others. Before refinancing federal loans, borrowers also need to consider whether they’re giving up flexibility they may someday need.
Ultimately, while low-interest rates make it an ideal time to refinance, every borrower needs to decide whether conditions are right for them personally before moving forward with a refinance loan to pay off existing student debt.
Maintenance Loans In England 2021/22
| Household Income | Away from home | Away from home |
|---|---|---|
| £4,422 | £6,166 |
The household incomes in bold represent the upper earnings thresholds for the parents of students in each living situation. As the table shows, students with parents earning above the following thresholds will receive the minimum Maintenance Loan for someone with their living arrangements:
- £3,516 if you live at home and your household income is above £58,220
- £4,422 if you live away from home and outside London, and your household income is above £62,286
- £6,166 if you live away from home and in London, and your household income is above £70,004.
Bear in mind that the household incomes we’ve given in the table above are just examples the Maintenance Loan you receive will be calculated using your exact household income rather than a band .
What are the minimum and maximum Maintenance Loans in England?
The minimum Maintenance Loan on offer for students from England is £3,516, which is paid to students with a household income of £58,222 or more and who’ll be living at home during their time at uni.
The maximum Maintenance Loan is £12,382 and is paid to students who will be living away from home and in London, and whose annual household income is £25,000 or less.
And for more info on Student Loans in England, check out this guide.
For that reason, weve included Maintenance Grants amounts in these tables, starting with the amount on offer if youll be living with your parents:
| Household income |
|---|
| Household income |
|---|
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Consider The Types Of Loans You Have
Federal student loan types include:
- Direct subsidized loans
- Direct PLUS loans
- Direct consolidation loan
If youâre refinancing a private loan with a newer one, you only risk a change in the rates and life of the loan. However, changing a federal loan to a private loan is another story. Here are some important takeaways.
- Refinancing federal student loans means you lose exclusive benefits provided through the U.S. Department of Education. These include public service loan forgiveness , income-driven repayment plans, and forbearance and deferment options.
- Once you refinance with a private lender, you cannot refinance back to a federal student loan in the future.
- Accommodations like the 0% interest rate in response to the COVID-19 crisis wonât apply to private loans.
