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College Students and Recent Grads, Pay Down My Debt, Reviews

cuStudentLoans Consolidation Review

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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cuStudentLoans is a service provided by LendKey. The service allows you to consolidate your student loans through a network of credit unions. Credit unions are member-owned institutions that typically provide higher rates for saving and lower rates for lending. You will likely also be able to find better credit card interest rates, fewer fees, and accounts that require lower minimum balances.

Because credit unions are member owned, the service provided directly benefits the members. However, in order to join a credit union and profit from the perks, you must be eligible to join. For example, the Credit Union of Georgia accepts members that reside in Cobb or Cherokee county, students or employees at educational institutions in those counties, or immediate family members of those primarily eligible. They also accept those associated with Cobb County realtors, a church in Cherokee county, and retired educators in Cobb County. If they had the best rates for loan but you were not eligible to become a member, then you are just out of luck.

However, cuStudentLoans aims to match credit union lenders with borrowers through the network of more than 150 not-for-profit credit unions.

In this review, we will share:

  • The pros of consolidating through cuStudent Loans
  • The cons of consolidating through cuStudent Loans
  • Who should consider consolidating
  • The potential LIBOR (London Interbank Offered Rate) surprise
  • Alternatives that you should consider

The Pros

cuStudentLoans offers a low rate of 2.92% APR for a max term of 15 years. This provides the borrower more time to repay the loans than the standard 10-year repayment offered on federal student loans.

There are no origination fees and you can consolidate a maximum of $175,000. cuStudentLoans does offer forbearance/hardship programs and interest only repayment as well. A forbearance program allows you to halt student loan payments for a period of time if you are experiencing a financial hardship. However, interest continues to accrue and once the forbearance ends, the interest is capitalized, or added to the principal balance.

Borrowers can choose two products, the cuScholar Private Student Loan and cuGrad Student Loan Refinancing. cuScholar allows you to borrow through not-for-profit credit unions with the Private Student Loan product with rates as low as 3.22% APR. The cuGrad Student Loan Refinancing product allows you to refinance or consolidate undergraduate and graduate private and federal student loans into one loan with one interest rate. Rates start as low as 2.92%.

The Cons

Choosing to consolidate federal loans with private loans will result in a loss of options provided with federal loans. For example, a loan consolidation with any outside lender prevents you from applying for an income based repayment and other repayment options.

Not all applicants will qualify for the lowest rate. Applicants with excellent credit scores will qualify for the lowest rates. The rate is variable and is calculated by adding a margin ranging from 2.99% to 7.9% to one month LIBOR. LIBOR is the London Interbank Offered Rate and is a benchmark rate that some of the world’s banks use to charge each other for short-term loans. Because LIBOR changes as the cost of borrowing changes for banks, it is often used in the calculation of floating rate loans. However, the rate is ultimately capped at 18%.

[How to Get a Student Loan Forgiven]

For Whom is cuStudent Loans Best?

If you have private student loan that you would like to consolidate and the loans have high interest rates, then this product may be for you. Assuming you owe $30,000 in student loans with a monthly payment of $324, and excellent credit, you could save an estimated $1,009 per year. This savings is simply the difference in monthly payments. The new payment of $239.90 will allow you to save $84.10 each month totaling $1,009 by the end of the year. With an added reduction in interest, you could potentially save even more over the life of the loan.

The ideal candidate for Student Loan Refinance has:

  • $7,500 - $125,000 in undergraduate student loan debt ($7,500 - $175,000 in graduate debt)
  • Applicants must have reliable gross monthly income of $2,000 to apply alone. To apply with a cosigner, applicants must have reliable gross monthly income and cosigners must have reliable gross monthly income of $2,000.
  • US Citizen or Permanent Resident

[The Consequences of Refinancing Federal Student Loans]

The Potential LIBOR Surprise

With LIBOR at record lows for the last few years, there is much speculation on when we can expect an increase. A loan with an interest rate based on LIBOR could present a nasty surprise if the rate jumps unexpectedly. A monthly payment that was previously manageable could double or triple with a rate jump. With the same $30,000 balance, a low 2.9% interest rate would mean a $288 monthly payment. However, if one month LIBOR increases and the loan rate jumps to the maximum 18%, the monthly estimated payment increases to $541; more than double the original payment.

[Miss a Student Loan Payment? Where to Find Help and What Happens]

How cuStudentLoans Compares to Competitors

Both SoFi and Citizens Bank offer fixed rate loan products. cuStudentLoans only offers variable rate products. The lowest rate for both SoFi and Citizens Bank products are higher than the lowest rate offered by cuStudentLoans; however, the fixed rate is not subject to change.

SoFi* is an option for student loan refinancing and offers fixed rate options with low rates ranging from 3.5% to 7.24%. SoFi also offers 20-year terms with no maximum on the total loan amount. However, SoFi cannot provide loans to residents of certain states so you must check eligibility before applying. No application, origination or prepayment penalty fees.

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Citizens Bank offers a fixed rate education refinance loan with low rates ranging from 4.74% to 8.9%. However, the maximum loan is capped at $170k for graduate and $90k for undergraduate refinance. Citizens Bank offers 20-year terms and there are no prepayment penalties.

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So, Should You Consolidate?

If you want to consolidate your student loans and you have excellent credit, then consider cuStudentLoans as an option. However, the variable interest rate is a concern and could cause your monthly payment to jump at any time. And consolidating federal student loans could cause you to lose some of the benefits offered with federal loans. But keep in mind; consolidating your student loans can help you streamline your finances as you make one payment each month. Evaluate your loan type, federal or private, and determine if a loan consolidation with cuStudentLoans is right for your situation.

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*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.

LaTisha Styles
LaTisha Styles |

LaTisha Styles is a writer at MagnifyMoney. You can email LaTisha at LaTisha@magnifymoney.com

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College Students and Recent Grads, Pay Down My Debt

Can You Discharge Student Loans in Bankruptcy?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Student loans have been a hot topic in recent news and for good reason. The level of student loan debt in the United States has grown substantially over the past several decades. As of 2014, the balance of student loan debt reached $1.2 trillion. Students burdened with debt have one option when it comes to repayment: pay the debt. However, in extreme circumstances, it may be possible to completely discharge student loan debt in bankruptcy.

How to Discharge Student Loans in Bankruptcy

The U.S. Department of Education website provides four cases in which federal student loans may be discharged. Those include:

  1. Closed school discharge
  2. Total and permanent disability discharge
  3. Death discharge
  4. Bankruptcy discharge

There are a few more options for partial discharge with qualifications. The website lists bankruptcy as an option in rare cases.

“If you file Chapter 7 or Chapter 13 bankruptcy, you may have your loan discharged in bankruptcy only if the bankruptcy court finds that repayment would impose undue hardship on you and your dependents. This must be decided in an adversary proceeding in bankruptcy court. Your creditors may be present to challenge the request.”

The U.S. bankruptcy court will use the three-part Brunner test to determine if the student loans are eligible for discharge in bankruptcy. To show hardship you must show that:

  1. If you were forced to repay the loan, you would not be able to maintain a minimal standard of living.
  2. There is evidence that this hardship will continue for a significant portion of the loan repayment period.
  3. You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).

If you are unable to satisfy any of the three requirements, the loan will not be discharged. However in a study published in the American Bankruptcy Law Journal by Jason Iuliano, 39% of those who applied were granted at least some discharge.

For example, if you are 30 and your student loan payments make up a significant portion of your total income, and you can prove that this hardship will continue for many years you might be able to have your student loans included in your bankruptcy.

But if you just started making payments and have not attempted to use available programs such as income-based repayment, then you may have a harder time discharging your student loans.

If you feel that bankruptcy is for you, consult a lawyer and consider including your student loans.

[Struggling to pay back private student loans? Learn about loan modification here.]

Ramifications of Bankruptcy

Choosing to eliminate your student loans using bankruptcy is a difficult path. Moreover, you will mark your credit report for 7 or 10 years with a bankruptcy filing. This could prevent you from purchasing a home, opening new lines of credit, and benefiting from the best rates to borrow money. It could also prevent you from getting a job with credit pre-screening.

Options So You Can Avoid Bankruptcy

If you would rather avoid bankruptcy, here are more ways to eliminate your student loan debt.

Reduce or Halt Your Current Payment

Determine if you are eligible for deferment or forbearance. A deferment is a period during which repayment of the principal and interest of your loan is temporarily delayed. Depending on the type of loan you have, the federal government may pay the interest on your loan during this period.

If you can’t make your scheduled student loan payments, but don’t qualify for deferment, a forbearance may allow you to stop making payments or reduce your monthly payment for up to 12 months.

[Miss a student loan payment? Learn how to find help here.]

Choose a Reduced Payment Plan

For federal loans, there are a few repayment plans that can help you manage your student loan repayment. Choose one of the following:

  • Income Based Repayment Plan – Payments are calculated based on your discretionary income and can extend up to 25 years of repayment.
  • Graduated Repayment Plan – Payments start off small then increase every two years for a maximum of 10 years of repayment.
  • Extended Repayment Plan – Payments can extend up to 25 years of repayment.
  • Pay as You Earn Repayment Plan – Payments are calculated based on your discretionary income and can extend up to 20 years of repayment.
  • Income-Contingent Repayment Plan – Payments are based on your adjusted gross income and can extend up to 25 years of repayment.
  • Income Sensitive Repayment Plan – Payments are based on your annual income and last for a maximum of 10 years; however, you will pay more over time versus the standard 10-year repayment plan.

[Read about Student Loan Forgiveness Programs Here.]

Career Based Discharged

You can also have your student loans discharged if you take a certain career path and your loans are: Direct, FFEL Program, or Federal Perkins loans. Private loans are often not eligible for forgiveness programs. As an eligible public service employee you can have 100% of your loan balance forgiven after 120 consecutive payments; this assumes that you maintain your status as an eligible public service employee while making those payments. If combined with one of the reduced payment plan options that could mean a substantial reduction in total repayment balance.

Check out our Student Loan Refinance table to compare your options.

 

LaTisha Styles
LaTisha Styles |

LaTisha Styles is a writer at MagnifyMoney. You can email LaTisha at LaTisha@magnifymoney.com

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