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College Students and Recent Grads, Pay Down My Debt

19 Options to Refinance Student Loans – Get Your Lowest Rate

19 Options to Refinance Student Loans - Get Your Lowest Rate

Updated: June 22, 2016

Are you tired of paying a high interest rate on your student loan debt? Are you looking for ways to refinance your student loans at a lower interest rate, but don’t know where to turn? We have created the most complete list of lenders currently willing to refinance student loan debt.

You should always shop around for the best rate. Don’t worry about the impact on your credit score of applying to multiple lenders: so long as you complete all of your applications within 14 days, it will only count as one inquiry on your credit score. You can see the full list of 19+ lenders below, but we recommend you start here, and check rates from the top 5 national lenders offering the lowest interest rates. We update this list daily:

LenderTransparency ScoreMax TermFixed APRVariable APRMax Loan Amount 
commonbondA+

20


Years

3.50% - 7.99%


Fixed Rate

2.14% - 6.19%


Variable Rate

No Max


Undergrad/Grad
Max Loan
apply-now
lendkeyA+

20


Years

3.25% - 8.22%


Fixed Rate

2.14% - 6.92%


Variable Rate

$125k / $175k


Undergrad/Grad
Max Loan
apply-now
earnestA+

20


Years

3.50% - 7.45%


Fixed Rate

2.15% - 5.80%


Variable Rate

No Max


Undergrad/Grad
Max Loan
apply-now
SoFiA+

20


Years

3.50% - 7.74%


Fixed Rate

2.15% - 5.95%


Variable Rate

No Max


Undergrad/Grad
Max Loan
apply-now
PurefyA+

20


Years

3.95% - 6.75%


Fixed Rate

3% - 4.95%


Variable Rate

$350k / $350k


Undergrad/Grad
Max Loan
apply-now

We have also created:

But before you refinance, read on to see if you are ready to refinance your student loans.

Can I Get Approved?

Loan approval rules vary by lender. However, all of the lenders will want:

  • Proof that you can afford your payments. That means you have a job with income that is sufficient to cover your student loans and all of your other expenses.
  • Proof that you are a responsible borrower, with a demonstrated record of on-time payments. For some lenders, that means that they use the traditional FICO, requiring a good score. For other lenders, they may just have some basic rules, like no missed payments, or a certain number of on-time payments required to prove that you are responsible.

If you are in financial difficulty and can’t afford your monthly payments, a refinance is not the solution. Instead, you should look at options to avoid a default on student loan debt.

This is particularly important if you have Federal loans.

Don’t refinance Federal loans unless you are very comfortable with your ability to repay. Think hard about the chances you won’t be able to make payments for a few months. Once you refinance, you may lose flexible Federal payment options that can help you if you genuinely can’t afford the payments you have today. Check the Federal loan repayment estimator to make sure you see all the Federal options you have right now.

If you can afford your monthly payment, but you have been a sloppy payer, then you will likely need to demonstrate responsibility before applying for a refinance.

But, if you can afford your current monthly payment and have been responsible with those payments, then a refinance could be possible and help you pay the debt off sooner.

Is it worth it? 

Like any form of debt, your goal with a student loan should be to pay as low an interest rate as possible. Other than a mortgage, you will likely never have a debt as large as your student loan.

If you are able to reduce the interest rate by re-financing, then you should consider the transaction. However, make sure you include the following in any decision:

Is there an origination fee?

Many lenders have no fee, which is great news. If there is an origination fee, you need to make sure that it is worth paying. If you plan on paying off your loan very quickly, then you may not want to pay a fee. But, if you are going to be paying your loan for a long time, a fee may be worth paying.

Is the interest rate fixed or variable?

Variable interest rates will almost always be lower than fixed interest rates. But there is a reason: you end up taking all of the interest rate risk. We are currently at all-time low interest rates. So, we know that interest rates will go up, we just don’t know when.

This is a judgment call. Just remember, when rates go up, so do your payments. And, in a higher rate environment, you will not be able to refinance to a better option (because all rates will be going up).

We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period. If you think it will take you 20 years to pay off your loan, you don’t want to bet on the next 20 years of interest rates. But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk.

Places to Consider a Refinance

If you go to other sites they may claim to compare several student loan offers in one step. Just beware that they might only show you deals that pay them a referral fee, so you could miss out on lenders ready to give you better terms. Below is what we believe is the most comprehensive list of current student loan refinancing lenders.

You should take the time to shop around. FICO says there is little to no impact on your credit score for rate shopping as many providers as you’d like in a single shopping period (which can be between 14-30 days, depending upon the version of FICO). So set aside a day and apply to as many as you feel comfortable with to get a sense of who is ready to give you the best terms.

Here are more details on the 5 lenders offering the lowest interest rates:

1. CommonBond*: Variable Rates from 2.14% and Fixed Rates from 3.50% (with AutoPay)

Commonbond1CommonBond (read our full CommonBond review) started out lending exclusively to graduate students. They initially targeted doctors with more than $100,000 of debt. Over time, CommonBond has expanded and now offers student loan refinancing options to graduates of almost any university (graduate and undergraduate). In addition (and we think this is pretty cool), CommonBond will fund the education of someone in need in an emerging market for every loan that closes. So not only will you save money, but someone in need will get access to an education.

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2. LendKey*: Variable Rates from 2.14% and Fixed Rates from 3.25% (with AutoPay)

Lendkey1LendKey (read our full LendKey review) works with community banks and credit unions across the country. Although you apply with LendKey, your loan will be with a community bank. If you like the idea of working with a credit union or community bank, LendKey could be a great option. Over the past year, LendKey has become increasingly competitive on pricing, and frequently has a better rate than some of the more famous marketplace lenders. And, during May 2016, anyone who applies via MagnifyMoney will receive a $250 cash bonus, which will be awarded when the loan closes.

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3. Earnest*: Variable Rates from 2.15% and Fixed Rates from 3.50% (with AutoPay)

earnest1Earnest (read our full Earnest review) offers fixed interest rates starting at 3.50% and variable rates starting at 2.13%. Unlike any of the other lenders, you can switch between fixed and variable rates throughout the life of your loan. You can do that one time every six months until the loan is paid off. That means you can take advantage of the low variable interest rates now, and then lock in a higher fixed rate later. You can choose your own monthly payment, based upon what you can afford (to the penny). Earnest also offers bi-weekly payments and “skip a payment” if you run into difficulty.

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4. SoFi*: Variable Rates from 2.15% and Fixed Rates from 3.50% (with AutoPay)

sofi-inline

SoFi (read our full SoFi review) was one of the first lenders to start offering student loan refinancing products. Although SoFi initially targeted a very select group of universities (it started with Stanford), now almost anyone can apply. You need to have a degree, a good job and good income in order to qualify. SoFi wants to be more than just a lender. If you lose your job, SoFi will help you find a new one. If you need a mortgage for a first home, they are there to help. And, surprisingly, they also want to get you a date. SoFi is famous for hosting parties for customers across the country, and creating a dating app to match borrowers with each other.

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5. purefy: Variable Rates from 3% and Fixed Rates from 3.95% 

purefy

Purefy (read our full purefy review) was formerly known as CordiaGrad. The founder of purefy used to work for a big bank, and decided to buy a small bank and use it as a platform to grow. Purefy will refinance undergraduate and graduate loans.

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In addition to the Top 5 (ranked by interest rate), there are many more lenders offering to refinance student loans. Below is a listing of all providers we have found so far. This list includes credit unions that may have limited membership. We will continue to update this list as we find more lenders. This list is ordered alphabetically:

  • Alliant Credit Union: In order to qualify, you need to have a bachelor’s degree. The minimum credit score is 680, and you need two years of employment and a minimum income of $40,000. Interest rates start as low as 3.75%. Anyone can join this credit union by making a $10 donation to Foster Care for Success.
  • Citizens Bank: To get the best deal, you should have at least a bachelor’s degree. They will look at your credit history, and want to make sure that at least the last three payments on your student loans have been made on time. If you don’t have your degree, you need to have made the last 12 payments (principal and interest) on time. You must make at least $24,000 per year. They offer fixed rates starting at 4.74% and variable rates start from 2.19%.
  • College Avenue: College Avenue offers fixed rates starting at 4.74% and variable at 2.50%, and only offers 15 year terms.
  • CommonWealth One Federal Credit Union: Variable interest rates start at 3.36%. You can borrow up to $75,000 and need to be a member of the credit union in order to qualify.
  • Credit Union Student Choice: This is a tool offered by credit unions. The criteria and pricing vary by credit union. The credit unions have restricted membership, but you can find out if you qualify on this site.
  • DRB Student Loan*: They will refinance undergraduate, Parent PLUS and graduate loans including MBA, Law, Medical/Dental (Post Residency), Physician Assistant, Advanced Degree Nursing, Anesthetist, Pharmacist, Engineering, Computer Science and more degrees. Variable rates as low as 4.17% and 5.77% fixed.
  • Eastman Credit Union: They don’t share much of their criteria publicly. Fixed rates start at 6.5% and you must be a member of the credit union. Credit union membership is not available to everyone.
  • Education Success Loans: You must be out of school for at least 30 months, and you must have a degree. You also need a good credit score, with on-time payment behavior. Variable and fixed loan options are available, with rates starting at 4.99%.
  • EdVest: They offer refinancing options for private loans used to finance attendance at a Title IV, degree-granting institution. If the loan balance is below $100,000 you need to make at least $30,000 a year. If your balance is above $100,000 you need to make at least $50,000. Variable rates start at 3.180%, and fixed rates start at 4.740%.
  • First Republic Eagle Gold. It’s hard to beat these rates – starting at 1.95% fixed and 1.87% variable. But you need to go in person to a First Republic branch to complete your account opening. They are located in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich, and New York City. Loans must be $60,000 – $300,000 and you need a 750 or higher credit score with 24 months experience in your current industry.
  • IHelp: This service will find a community bank. Community banks can actually be expensive. You need to have 2 years of good credit history, with a DTI (debt-to-income) of less than 45% and annual income of at least $24,000. Fixed rates are available, starting at 6.22% with a co-signer, and 7.21% for non-cosigned loans.
  • Mayo Employees Credit Union: You need at least $2,000 of monthly income and a good credit history. Variable rates are available, starting at 5.00% and you would need to join the credit union.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve, the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 3.87%.
  • RISLA: You need at least a 680 credit score, and can find fixed interest rates starting at 4.49% if you use a co-signer.
  • UW Credit Union: $25,000 minimum income required, with at least 5 years of credit history and a good repayment record. Fixed and variable interest rates are available, with variable rates starting at 2.18% and fixed rates starting at 4.04%. You need to join the credit union in order to refinance your loans.
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 3.49% and fixed rates starting at 5.99%. Wells Fargo does not have a tradition of being a low cost lender.

You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance. You can also email us with any questions at info@magnifymoney.com.

Don’t forget to follow us on Twitter @Magnify_Money and on Facebook.

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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.

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College Students and Recent Grads

9 Questions to Ask Before Accepting Employer-Tuition Assistance

Tuition-reimbursement_lg

For the most part, employer-provided tuition assistance is a pretty sweet perk. Your work will literally pay for you to further your education, saving you tons of money while you’re bringing home a paycheck. More than 80% of organizations surveyed by the International Foundation of Employee Benefit Plans in 2015 offered some sort of educational assistance or tuition reimbursement. Some of the more familiar names on the list of companies offering tuition perks include UPS, Home Depot, Bank of America, and AT&T.  Starbucks is probably the biggest brand to jump on the tuition-assistance bandwagon in the last few years.

But before you jump at the first tuition assistance package that lands in your lap, keep this in mind: companies don’t just hand out free cash and expect nothing in return. Tuition benefits nearly always come with strings attached…strings that could potentially turn you into a modern day indentured servant.

Ask your employer these 9 questions before you sign up:

1.How many hours do I have to work in order to qualify?

Some employers only provide tuition assistance or reimbursement to full-time employees, which generally means you’re working 25-40 hours per week. Others extend their program to part-time workers. But if you’re picking up a part-time job solely for this perk, it would be best to look into the time commitment first. If you don’t think you can handle a full-time job on top of being a full-time student, the programs that require 25-40 hours per week may not be for you.

2. Do I have to earn certain grades?

Some companies may demand you perform at a high level (earning As and Bs) in your courses in order to remain eligible for tuition assistance moving forward. If you don’t make the grade, you may find yourself getting stuck with your tuition bill at the end of the semester.

3. How long do I have to be employed before qualifying?

Like many other job perks, tuition assistance may come with a probationary period.  That means your job will require you to work for a certain amount of time before you become eligible. That period could be as short as 30 days and as long as several years. So, if you’re applying for a job and hoping they’ll cover classes that start in two weeks, you might be out of luck.

4. Is this tuition assistance or tuition reimbursement?

Generally, tuition assistance means that your employer will pay the school directly. Tuition reimbursement means that you’ll have to front the cash for your studies and get reimbursed by your job once your semester or term is over. Because these terms are often used interchangeably in HR circles, be sure to clarify before you sign up. You don’t want to be on the hook for classes you can’t afford upfront.

Pro tip: Sometimes your school’s Bursar office will let you make a partial payment as long as your employer sends in a letter asserting their intention to pay upon receipt. This policy will vary from school to school. Do your homework beforehand so you know what to expect.

5. Do my classes have to be related to my job?

Work at a bank but want to major in Medieval Literature? Your employer may not be so keen on paying for your education. While some employers will fund whichever degree you decide to pursue, others will only pay for courses related to a major that will strengthen a skill set relevant to your current job description. They can even refuse to pay for courses that have nothing to do with your day job even if they are required for your degree.

6. What is the max that will be reimbursed per semester?

Just because your employer provides tuition assistance doesn’t mean you’re getting a free ride. The IRS will want its cut. As it stands, you won’t pay any taxes on the first $5,250 your employer kicks in each year. But any amount beyond that is subject to payroll taxes. This can cause a huge headache for firms, so many companies just decide to cap their contributions to employee education at $5,250 per year.

7. What is the max I can use overall?

Some programs will only pay a certain lifetime amount. That means if you have to take a number of remedial courses or end up having to retake a class, your financial plan could be thrown off kilter. Be sure to examine whether the max benefit is measured in terms of time or dollars, too. If you only have a certain amount of years to finish your degree, you’ll likely want to become a full-time student rather than only attending part-time.

Time limits are frequently applied to other types of aid, too. For example, if you receive the Pell Grant, you’ll only get it for twelve semesters, and it can only be applied to one major. See if your employer’s tuition assistance program has similar limitations.

8. How long do I have to stay with the company after I graduate?

Your employer doesn’t want to pay to educate you just to lose you to the next highest bidder. They’ve invested in your education, and are going to want to protect that investment. For this reason, most employers will have a Tuition Payback Clause. Read this carefully, as it may be something you can negotiate.

Typically, these clauses cover three distinct situations. The first is voluntary separation, where you quit or leave for another company. If you do this within a certain timeframe of accepting tuition assistance, your employer is likely to make you pay them back for the part of your education that they funded.

However, some employers will make you pay them back if you are terminated with cause. That is, if you are fired for an action that would prevent you from collecting unemployment benefits, you’re probably going to have to pay them back for your schooling, too.

In an even nastier twist, some employers will require you to pay them back if you are laid off. If you see a clause like this in your tuition assistance agreement, consider it a huge red flag.

9. Can I set up tuition assistance if I’m self-employed?

Yes! In fact, if you are a sole proprietor attending college, it can be wise to set up a tuition assistance program for yourself. The amount of money you allot to your education will not count as taxable income up to that $5,250 mark. That means by setting aside tuition funds up you’ll effectively be lowering your taxable income for the year.

Keep in mind that when you establish this as a benefit of your business, you may disqualify yourself for things like the American Opportunity Credit. Sometimes costs over $5,250 can still be claimed under such credits as long as they were used on tuition, fees or necessary materials like textbooks.

Before filing your taxes, you need to make your tuition assistance program official. Have a professional help you write a legal document that will satisfy the IRS should you ever get audited.

Know what you’re getting into

Tuition assistance programs can make college more affordable, and translate into a higher paycheck. Just be sure you know program limitations and stipulations before signing on the dotted line. It could save you time, headaches and potential budget fails later down the road. If tuition assistance isn’t available, check to see if your company helps pay off student loans.

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College Students and Recent Grads, News, Student Loan ReFi

Hillary Clinton Just Added 4 Major Upgrades to Her Student Debt Plan

Student Debt Plan

Hillary Clinton announced ambitious new plans to help ease the burden of college costs — from student loans to child care — for millions of students and graduates. All in all, her new proposals will add a few extra layers of icing on the reforms she proposed in her College Compact plan last year. On the campaign trail Wednesday, Clinton detailed her plans in front of a roaring crowd of supporters. But she also left many questions about how she will finance her plans unanswered.

Here’s what you need to know about Clinton’s new college costs agenda:

Borrowers will get a 3-month break on loan payments.

College graduates already have a six-month grace period to pay back student loans after college. Clinton says she will issue an executive order that will allow anyone with federal student loans — whether they have graduated from college or not — qualify for a 3-month break on loan payments.

During that break, “every borrower will be given the resources and targeted help they need to save money on their loans,” according to the updated plan published on Clinton’s campaign website Wednesday.

Those resources will include guidance on how to sign up for income-based repayment options, refinance their loans, or qualify for interest rate reduction. This pairs nicely with Clinton’s previous plans to give past borrowers a chance refinance their loans at today’s interest rates, which are much lower than they were a decade or so ago. Of course, borrowers can already refinance federal student loans through a number of new startups like SoFi and Commonbond. But in doing so they would be replacing their federal student loans — and all the great repayment options that come with them — with a new private loan without as many flexible repayment options. If Clinton’s plan comes to pass, it seems borrowers could refinance their loans and still maintain those federal loan perks.

Clinton’s camp did not say whether interest will continue accruing on student debt during this three-month moratorium. Interest continues accruing when borrowers sign put their loans into forbearance or deferment. It stands to reason interest would accrue during this moratorium period as well.

The plan proposal vaguely suggests the federal government will use this three-month time period to “crack down on for-profit colleges and loan servicers who have too often taken advantage of borrowers.” But there aren’t any details on how the Department of Education, the main watchdog for universities, will go about policing their student loan collection efforts during these moratoriums. For-profit and nonprofit colleges alike have been found to hire third party debt collectors that can make life hell for borrowers who fall behind on payments. But some of those same loan servicers are actually contracted by the federal government itself to collect student debt.

College childcare funding will increase 15-fold

Clinton pledged a fifteen-fold increase in federal funding for on-campus childcare. This is a massive promise.

As it stands, the federal grant program that currently supports on-campus child care has been aggressively de-funded over the last decade. More than 300 colleges were awarded $25 million in funding for on-campus childcare services in 2001. By 2015, funding had dropped to $15.1 million, which was divided among 86 campuses.

If Clinton keeps to her word, this could be a massive boon to college students who are raising families. More and more young parents are choosing to pursue a college degree while juggling the cost of childcare. The rate of parents pursuing college degrees has risen by 50% over the last decade, according to the Institute for Women’s Policy Research.

A recent study by the Young Invincibles found one in five millennial parents today is impoverished. The poverty rate for young parents has increased 40% since 2000.

Public colleges will be free for families earning $125,000 and less

In a move that is sure to pique the interest of Bernie Sanders supporters, Clinton has come to embrace the idea of free college for some families. Previously, her College Compact plan had called on families to make at least some contribution to tuition costs.

Clinton’s new plan would make college tuition at public in-state schools completely free for families earning less than $125,000 per year. Her camp claims this will cover more than 80% of all U.S. households. But this change wouldn’t happen overnight. Clinton’s plan calls for a gradual rollout, starting with families who earn $85,000 or less. That income threshold will be raised by $10,000 every year until 2021.

Clinton had said previously she would pay for reduced tuition at public four-year colleges and community colleges by capping the amount the wealthy can deduct on their taxes for charitable donations. That cap is now 50% of adjusted gross income.

It’s not clear how she plans on paying for the additional millions of dollars it will surely cost to make college free for 80% of households.

More Pell Grant funding

Last but not least, Clinton’s new proposal would restore year-round funding for the Pell Grant program. This would give students the ability to use Pell Grant funds for summer courses.

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What to Do When Parents Won’t Pay for College and FAFSA Won’t Provide Aid

college landscape

When you’re applying for financial aid to attend college as an undergraduate, the amount of need-based aid you qualify for is usually based on your parents’ income and assets. The Free Application for Federal Student Aid (FAFSA) calculates your expected family contribution (EFC), and individual colleges and universities then use your EFC to determine how much need-based student aid you are eligible to receive. If it is determined that your parents can reasonably cover 100% of the cost of college, you may not qualify for any need-based aid at all.

However, this process of determining need-based aid is based on the assumption that if your parents can afford to make a substantial contribution to your tuition, room, and board, they will be willing to do so.

But what if your parents simply aren’t willing to make that contribution?

If you don’t qualify for need-based aid (or only qualify for partial need-based aid) and your parents simply aren’t willing to contribute, you may feel like college is not an option. And it’s true that tuition, room, and board can be very expensive—tens of thousands of dollars per year in many cases. However, don’t give up right away. There still may be ways for you to attend college even if your parents won’t help you out financially. Here are ways to start:

1. Check the current guidelines for dependent vs. independent students

All students applying to college are considered either dependent or independent by the federal government. If you are a dependent student, your parents’ income and assets are taken into account when determining need-based aid, but if you are an independent student, only your own financial situation (and that of your spouse, if you are married) is taken into account, which means you may qualify for more need-based aid. There are several ways to qualify as an independent student, including being married, being older than a certain age, having dependent children, or being a veteran of the U.S. armed forces. The FAFSA can help you determine if you are dependent or independent. More information is also available here.

2. If you haven’t already done so, fill out the FAFSA

Even if you are a dependent student and your parents have already told you they’re not willing to contribute to college costs, you should still absolutely fill out a FAFSA. You may find that you are eligible for more aid than you think. In particular, you may have the option of taking out student loans that would help you cover the cost of college yourself, without your parents’ help. Student loans should only be taken out under careful consideration, as they can take many years to repay, but if they are the only way you are able to go to college, they may be a good option for you. 

3. Remember that need-based aid isn’t the only type of aid available

There are many merit-based scholarships and grants available that you may be able to apply for. The school(s) you’re considering attending may offer merit scholarships; check with the admissions office for details and to determine whether or not you need to submit an extra application for these awards. You can also search online for grants and scholarships that are funded by external organizations and thus can be applied to the cost of any school. Apply for as many of these grants and scholarships as possible.

4. Consider asking for help from other relatives

Is there anyone else in your family who might be willing to help you out with college costs, perhaps through a personal loan? If you do take out a personal loan from someone you know, be sure to sit down with them and draw up a written agreement about interest and repayment so there are no misunderstandings.

5. Attend a state or community college

Tuition costs vary widely from school to school, so make sure you’re considering schools at the least expensive end of the spectrum. Many state colleges offer an excellent education at a much lower cost than private schools, and community colleges in some states even offer four-year degrees.

6. Consider taking a year off to work and save money, and apply next year instead

If your parents are open to it, you might be able to live at home while working and save even more money.

7. Look into supporting yourself through college by working full-time or part-time

Carefully calculate how much it would cost you per year to attend the least expensive school possible, taking tuition, fees, books, and living expenses into account. Is there any way you could pay for this yourself, either by going to school full-time and working part-time or (more likely) by working full-time and going to school part-time?

8. Look into applying for jobs at colleges that offer free/reduced tuition to employees

Some colleges and universities allow their full-time employees to take classes for free or at a reduced cost. However, note that this may vary widely by school, and there may also be a requirement that you must work a certain number of months or years before these benefits kick in. Not having a college degree yet may also limit the number and type of jobs you are able to apply for. However, this option is worth looking into.

Combine several of the above strategies

Putting together enough money to cover the cost of college yourself can be very challenging, but you may be able to make it work through a combination of merit scholarships, personal and/or federal loans, choosing an inexpensive school, saving money before you begin, and working while you’re enrolled in classes.

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College Students and Recent Grads

Will You Get Charged a Student Loan Origination Fee?

Student Loan Origination Fee
Startup Stock Photos

Most people know that when you’re considering borrowing money for your education, it’s extremely important to take interest rates into account. But did you know that in addition to interest rates, some types of student loans also carry origination fees?

What is an origination fee?

An origination fee is a one-time fee collected at the time the loan is disbursed; it is typically a percentage of the total loan amount. This means that instead of receiving the entire amount that you borrow, you receive the amount that you borrow minus the loan origination fee.

Origination fee rates

Most types of federal student loans, with the exception of Perkins loans, carry an origination fee. The current loan origination fees in 2016 for federal subsidized, unsubsidized, and PLUS loans are as follows:

Federal Direct Subsidized Loans: 1.068%

Federal Direct Unsubsidized Loans: 1.068%

Federal PLUS Loans: 4.272%

Decoding the cost

This means that if you take out, for example, a $10,000 unsubsidized loan from the federal government, the loan origination fee will be $106.80. So instead of receiving the full $10,000, you will only receive $9,893.20.

Similarly, if you take out the same $10,000 using a federal PLUS loan, the loan origination fee will be $427.20. In this case, you’ll only receive $9,572.80.

However, in both of these cases you will still be required to pay back the full $10,000. Additionally, interest will accrue on the full amount you borrowed and not just the amount you received.

Note also that the fees listed above are the current fees for new loans and are valid until October 1, 2016, at which time they may be adjusted. Additionally, if you took out a federal student loan prior to October 1, 2015, your fee may be different. You can find more information about origination fees on federal student loans at the StudentAid.gov website.

Private lenders don’t always charge origination fees

In contrast to the federal government, many top private lenders, such as Wells Fargo, Discover, Sallie Mae, and PNC, do not charge origination fees for loans that are applied toward study at undergraduate or graduate colleges. However, keep in mind that there may be other disadvantages to borrowing from private lenders, such as higher interest rates or a lack of the types of loan forgiveness, income-driven repayment plans or forbearance and deferment programs that are available through the federal government.

Always crunch the numbers

Origination fees are important to be aware of when considering taking out student loans. When you take out a loan with an origination fee, you will always be paying back the total amount that you borrowed, rather than the amount you received after the origination fee was subtracted, and interest will also accrue on that total amount. Although origination fees are one-time fees, they’re important to factor into your overall financial and loan repayment plan.

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CommonBond Student Loan Refinance Loan Review

CommonBond Grad Student Loan Refinance Loan Review

Updated June 22, 2016

CommonBond was founded by three Wharton MBAs who felt the sting of student loans after they graduated. The founders decided to provide a better solution for graduates, as they thought the student loan system was broken and in need of reform. As a result, they strive to make the refinance (and borrowing) process as simple and straightforward for graduates as possible.

CommonBond* began by servicing students from just one school, and has rapidly expanded. Today, CommonBond loans are available to graduates of over 2,000 schools nationwide. Although the business started servicing only students with graduate degrees, today CommonBond is also available to refinance undergraduate degrees as well.

As you might be able to tell by the name, CommonBond thinks of its community as family. There is a network of alumni and professionals within the community that want to help borrowers. This alone sets it apart from other lenders, as members often meet for events.

While these are all great things, we know you’re more interested in how CommonBond might be able to help you make your student loans more affordable. Let’s take a look at what terms and rates they offer, eligibility requirements, and how they compare against other lenders.

Refinance Terms Offered

CommonBond offers low variable and fixed rate loans. Variable rates range from 2.14% – 6.19% APR, and fixed rates range from 3.50% – 7.99% APR.

Note that these rates take a 0.25% auto pay discount into consideration.

There is no maximum loan amount. CommonBond will lend what you can afford to repay. CommonBond offers fixed and variable rates with terms of 5, 10, 15, and 20 years.

The hybrid loan is only offered on a 10 year term – the first 5 years will have a fixed rate, and the 5 years after that will have a variable rate.

CommonBond has a great chart listing repayment examples based off of borrowing $10,000, which can be found on its rates and terms page.

To pull an example from that, if you borrow $10,000 at a fixed 4.74% APR on a 10 year term, your monthly payment will be $104.80. The total amount you will pay over the 10 year period will be $12,575.90.

The Pros and Cons

CommonBond is available to graduates of 2,000 universities. While that is a very long list, not all colleges and universities are included.

One pro to consider is the hybrid loan option available. It might seem a little confusing at first – why would someone want a variable rate down the road?

If you’re confident you’ll be able to make extra payments on your loan and pay it off before the 5 years are up, you might be better off going with the hybrid option (if you can get a better interest rate on it).

This is because you’ll end up paying less over the life of the loan with a lower interest rate. If you were offered a 10 year loan with a fixed rate of 6.49% APR, and a hybrid loan with a beginning rate of 5.64%, the hybrid option would be the better deal if you’re intent on paying it off quickly.

What You Need to Qualify

CommonBond doesn’t list many eligibility requirements on its website, aside from the following:

  • You must be a U.S. citizen or permanent resident
  • You must have graduated

CommonBond doesn’t specify a minimum credit score needed, but based on the requirements of other lenders, we recommend having a score of 660+, though you should be aiming for 700+. The good news is CommonBond lets you apply with a cosigner in case your credit isn’t good enough.

Documents and Information Needed to Apply

CommonBond’s application process is very simple – it says it takes as little as 2 minutes to complete. Initially, you’ll be asked for basic information such as your name, address, and school.

Once you complete this part, CommonBond will perform a soft credit pull to estimate your rates and terms.

If you want to move forward with the rates and terms offered, you’ll be required to submit documentation and a hard credit inquiry will be conducted. CommonBond lists the following as required:

  • Pay stubs or tax returns (proof of employment)
  • Diploma or transcript (proof of graduation)
  • Student loan bank statement
  • ID, utility bills, lease agreement (proof of residency)

CommonBond also notes it can take up to 5 business days to verify documents submitted, so the loan doesn’t happen instantaneously.

Once your documents are approved, you electronically sign for the loan, and CommonBond will begin the process of paying off your previous lenders. It notes this can take up to two weeks from the time the loan is accepted.

Who Benefits the Most from Refinancing Student Loans with CommonBond?

Borrowers who are looking to refinance a large amount of student loan debt will benefit the most from refinancing with them.

Common Bond

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*referral link

Keeping an Eye on the Fine Print

CommonBond does not have a prepayment penalty, and there are no origination fees nor application fees associated with refinancing.

As with other lenders, there is a late payment fee. This is 5% of the unpaid amount of the payment due, or $10, whichever is less.

If a payment fails to go through, you’ll be charged a $15 fee.

It’s also noted that failure to make payments may result in the loss of the 0.25% interest rate deduction from auto pay.

Transparency Score

Getting in touch with a representative is simple and there is a chat and call option right on the homepage. Some lenders have this hidden at the bottom, or they don’t offer a chat option at all.

CommonBond also lets borrowers know they can shop around within a 30 day period to lessen the impact on their credit.

It does not list its late fees on its website, unlike other lenders. However, after making a chat inquiry, the question was answered promptly.

CommonBond does offer a cosigner release and is ranked with a A+ transparency score.

Alternative Student Loan Refinancing Lenders

The student loan refinancing market continues to get more competitive, and it makes sense to shop around for the best deal.

One of the market leaders is SoFi. It’s always worth taking a look to see if SoFi* offers a better interest rate.

The two lenders are very similar – CommonBond offers “CommonBridge,” a service that helps you find a new job in the event you lose yours. SoFi offers a similar service called Unemployment Protection.

SoFi’s variable rates are currently 2.15% – 5.95% APR with autopay, and its fixed rates are currently 3.50% – 7.74% APR, which is in line with what CommonBond is offering.

SoFi also doesn’t have a limit on how much you can refinance with them.

SoFi logo

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 *referral link

Another lender to consider is Earnest. There is no maximum loan amount, and Earnest has a very slick application process. Interest rates start as low as 2.15% (variable) and 3.50% (fixed).

Earnest

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*referral link

Lastly, you could check out LendKey. It offers student loan refinancing through credit unions and community banks, but only offers variable rates in most states and fixed rates in a select few. The maximum amount to refinance with an undergraduate degree is $125,000, and the maximum amount to refinance with a graduate degree is $175,000.

All three of these options provide forbearance in case of economic hardship and offer similar loan options (5, 10, 15 year terms).

Lendkey

Apply Now

*referral link

Don’t Forget to Shop Around

As CommonBond initially conducts a soft pull on your credit, you’re free to continue to shop around for the best rates if you’re not happy with the rates it can provide. As the lender states on its website, if you apply for loans within a 30 day period, your credit won’t be affected as much.

Since CommonBond does have strict underwriting criteria, you should continue to shop around and don’t be discouraged if you are not approved. The market continues to get more competitive, and a number of good options are out there.

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Collection Fees on Student Loans You Never Knew Could Happen

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If you’ve ever been through federal student loan entrance counseling, then you know that failing to make payments on federal student loans can have serious consequences. If you fall behind on your required monthly payments after you graduate, the Department of Education may take steps like garnishing your wages before they ever reach your bank account, withholding your tax refund, or even suing you.

But did you know that failing to pay back your federal student loans could also make you liable for collection fees?

If you have federally-financed student loans that are in default—which in most cases means that you haven’t made payments for 270 days—the federal government may refer your account to a collection agency. What may come as a surprise is that these collection agencies typically charge fees or commissions, and these fees can be added to the balance that you owe.

Though the fees vary depending on the agency and the type of loan you have, they can exceed 15% of your total balance, and can even reach up to 40% of your total balance in the case of Perkins loans. This means that if your current loan balance is $20,000, you could suddenly have between $3,000 and $8,000 in fees added to your account.

Ouch.

So how can I avoid having to deal with a collection agency?

Avoid default: The best way to avoid collection fees is to ensure that your student loan does not go into default. If you are struggling to make your monthly payments, contact the Department of Education right away to explain your situation and figure out a plan. For example, you may be able to reduce your required monthly payment amount through an income-driven repayment plan. You can find more information about how to apply for income-driven repayment here.

Check into deferment or forbearance: Depending on your situation, you may also be eligible for loan deferment or forbearance. You should look into applying for deferment or forbearance if you have returned to school, if you have an illness or financial hardship that affects your ability to make payments, or if you have recently served in the military. More information about loan deferment and forbearance is available here.

Heed warnings: If you do fail to make your required monthly payments, your loans will become delinquent and you will receive warnings from the Department of Education. Do not ignore these warnings. If you ignore them, your loans will go into default after 270 days and may be referred to a collection agency.

Monitor your credit: Additionally, if you have missed any payments on your student loans, be sure to check your credit score and get a credit report. If your credit score has been brought down by one or more missed payments, you can try writing a letter of goodwill to your loan servicer explaining your situation and politely requesting that they remove the missed payment from your credit report. You can find more information on how to write a letter of goodwill here.

But what if my loans have already been sent to a collection agency?

Take action immediately: If you receive a notice from a collection agency, this means your loans have gone into default. It is critical that you respond to the agency immediately to work out a plan for repayment. If you enter into a repayment agreement within 60 days, you will not be charged collection fees.

Try to pay back in full: If you are able to pay the full amount back, pay it immediately. This may not be an option for many people, but it is the fastest way to get your loans out of default.

Set up a rehabilitation plan: If you cannot pay the full amount, work with the collection agency to create a repayment plan—known in this case as a rehabilitation plan—that is manageable based on your current income. If the agency suggests a monthly payment amount that you feel is unmanageable, let them know that you need a lower amount, and send them documentation of your current income as proof.

Don’t miss a payment: Follow through on the rehabilitation plan! If you fail to make the payments you have agreed to, collection fees will be added to your account.

Ensure default status gets removed: After you have made nine on-time monthly payments according to the terms of your rehabilitation plan, your loan will be removed from default status. A loan can only be rehabilitated once.

Resources to help you

  • How to make a payment to a collection agency here.
  • 7 things to know if you have debt in collections here.
  • The Department of Education has a page about student loan default here.
  • The Department of Education’s page about getting out of student loan default is here.
  • The Department of Education provides contact information for the collection agencies it works with here.

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6 Ways to Find College Scholarships

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As the cost of college continues to soar, scholarships have become an essential part of college payment plans. Scholarships covered 17% of the average college bill, according to Sallie Mae’s most recent How America Pays For College report, with an average scholarship haul of $8,843.

Scholarship dollars varied widely, however, based on the type of school attended. Students at a four-year public or state university received, on average, $6,469 in scholarships, compared to $16,527 for students at four-year private universities.

Nonetheless, free money can certainly make a dent in your college tab. And knowing where to look for them is key to the process. Here are a few hints:

1. Search online sites

Scholarship matching websites are still a great source of scholarship information. There’s the U.S. Department of Labor’s scholarship search tool, as well as sites such as Fastweb, The College Board and Cappex. Each site’s search tools are a little bit different, but in general, you’ll be filling out an online questionnaire on everything from your ethnic background to gender to intended major, and seeing what scholarships match your criteria.

2. Skip paid services

“The results will not be better than the free services,” says Mark Kantrowitz, financial aid expert and publisher of Cappex. “The free services update their databases in real time, while paid services license a database that is updated once a year or once a quarter. If you have to pay money to get money, it’s probably a scam.” Kantrowitz recommends searching at least two free sites to give you the confidence that you’ve found all the scholarships for which you’re eligible. However, you can consider certain one-time fee apps like Scholly, which costs $2.99 for a one-time purchase in iOS and Android and helps you aggregate scholarship opportunities.

3. Check the financial aid office

The school you plan to attend may have scholarships available that aren’t listed elsewhere. Give the school a call—either as an incoming student or once you’re attending—and ask for information.

4. Look locally

Your school guidance counselor should know whether there’s any money to be awarded from groups in your area to graduating seniors. Your librarian might also be able to point you toward information on local awards. “Look for small local scholarships on bulletin boards outside your guidance counselor’s office, and near the jobs and careers section of the local public library,” Kantrowitz says. “Also look in the coupon section of the Sunday newspaper, where some national scholarships are advertised.” Groups such as your local Rotary, Kiwanis, and Elks clubs are good places to check, as well as your church.

5. Ask your parents

Do your mother or father work for a company that offers scholarships? If they’re not sure, have them check with their human resources department. Companies such as Verizon, Intel and Siemens offer awards to employee children and dependents, and 11% of employees overall offer this kind of benefit, according to the Society for Human Resource Management’s 2015 Employee Benefits report.

6. Keep applying

Scholarships aren’t just for incoming freshmen. In fact, while freshmen received an average of $5,793 in scholarships, according to Sallie Mae’s most recent numbers, seniors received a whopping $20,292. It pays to keep researching as you work your way through school.

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LendKey Student Loan Refinance Review

LendKey Student Loan Refinance Review

Updated June 15, 2016

Could you imagine trying to find the best student loan refinancing rate from community banks and credit unions on your own? How would you do it? Would you call every bank and credit union and ask for help? What a nightmare.

LendKey has relationships with 300+ community banks and credit unions all over the United States. LendKey* can issue loans to residents in any of the 50 states. This keeps you from having to pound the pavement by your lonesome. LendKey’s website will show you the best rate for refinancing your student loans.

Since 2007, LendKey has been a one stop shop for student loan refinancing. It also offers other types of loans. But for the sake of this review we’ll be focusing on how LendKey takes care of graduates looking to improve their debt situation. Fixed APRs range from 3.25% – 8.22%. Variable rates start as low as 2.14%.

Who can benefit from using LendKey? Anyone hoping to refinance their student loans should consider LendKey. It is easy to apply:

Lendkey

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If you’re on the fence about refinancing, here are some of the benefits to be gained:

Lower Payments

Refinance your way to a more manageable monthly payment.

Lower Rates

Spend less on interest by getting a lower rate than the aggregate of all individual student loans.

Simplified Finances

Making payments on multiple loans to multiple institutions at different times of the month can be quite the hassle. It’s much easier to remember just one payment. Many lenders even let you consolidate both private and federal loans.

Different Repayment Options

Different lenders offer different repayment options. It’s wise to explore all the options to determine what makes the most sense for your particular situation.

Pros of Using LendKey

A Unified Application Process

This is hugely important. With LendKey, you’re not shuffled through tons of screens on different domains – all using different logons and different (confusing!) user interfaces. Within 5 minutes, a person can navigate through LendKey’s application process. This means after 5 minutes, you can see how much you can save by refinancing. You can even choose what loan you want.

Cosigner Release Available

Yes, you can secure a low interest rate and then cut loose your cosigner. Once you prove you are responsible – LendKey no longer needs a cosigner tied to your account. This may help convince a cosigner to work with you initially. They won’t need to be on the hook for long. Once you’ve made 12 full and consecutive on-time payments, your cosigner may be released. LendKey does a credit check and examines your income to see if you are free to go it alone.

No Origination Fee

This is helpful since it means you are free to shop around without feeling committed.

Further Interest Rate Reduction

1% interest rate reduction once 10% of the loan principal is repaid during the full repayment period. This is subject to the floor rate.

0.25% ACH Interest Rate Reduction

Many lenders reduce interest rates by a quarter percent for borrowers who agree to automatic payments.

Federal and Private Loans Can Be Consolidated Together

However, you lose some federal benefits in doing so. Things like free insurance (provided with federal loans if you are killed or severely disabled), public service forgiveness and military service forgiveness as well as income-based repayment plans. Grace periods will likely be omitted when writing the new consolidated loan.

Over 40,000 Borrowers Serviced

As of January 2016, 40,000 people have used LendKey’s services.

Excellent Customer Support

According to cuStudentLoans (which LendKey owns so take this with a grain of salt), 97% of customers are satisfied. Customer support comes out of New York and Ohio. Phone support is available each day from 9AM to 8PM EST.

For what it’s worth, I called into support 5 times at random. The support I received from the sales team was really great. Even the gentleman with only 6 months of experience was quite knowledgeable.

Eligible Schools

This list of eligible schools is 2,200 and growing. Chances are your school is on the list. However, LendKey doesn’t encourage students to submit eligibility requests as other student loan refinancers do.

Return Policy

Yes, you can ‘return’ your loan. LendKey offers a 30 day no-fee return policy to allow you to cancel the loan within 30 days of disbursement without fees or interest. That’s pretty incredible.

Cons

LendKey Doesn’t Give You the Complete Picture

LendKey doesn’t help a lot with stacking institutions against each other. I suppose this is meant to not to play favorites. However, it would be nice to be able to read about each institution within the LendKey interface. I’d still advise opening up another tab to research the banks you are considering.

The Fine Print You May Miss

Since LendKey is a loan matchmaker, there isn’t a lot of fine print on the site. This means a person still needs to review the fine print of each institution before finalizing his or her loan as mentioned before. LendKey does a fantastic job of getting you 90% of the way. But that last 10% of fine print is between you and your lending institution. Read through everything before signing up for a new loan.

I read the Better Business Bureau complaint log for LendKey. There are only 11 complaints in the past 3 years. SoFi (a competitor) has 18 and another competitor, Earnest, has no complaints. These complaints were mostly small misunderstandings between the LendKey support team and the borrowers.

The Application Process

There are four steps to the simple application process. Step 1 is for estimating monthly payments for a private student loan. It’s simple. You identify the amount you’d like to borrow and fill in a radio button indicating your credit is fair, good, or excellent. The last part is where you enter which state you live in. This is because many programs are state specific. Step 1 takes 1 minute.

Step 2 takes 2 minutes. This is the step where you compare the rates and offers available to you. Choose what works best for your unique situation.

Step 3 again only takes 1 minute. This is the actual application. As mentioned earlier in this article, this process is done through the LendKey interface. And don’t worry, information inputted into LendKey is safe (privacy policy).

Step 4 takes 10 minutes. This is the step where a person verifies identity, school, and income (screenshots/pictures work so there’s no hassle with scanning!). You will know if you are approved during this step.

As with any company, there are competitors. Here are two worthy rivals also worth considering:

Alternatives to LendKey

SoFi

SoFi stands out with a job placement program. Yes, SoFi has an entire career services division. It’s smart. Instead of spending money on collections, SoFi invests in its borrowers. Also, if you would like a 20-year loan, consider SoFi. As mentioned earlier, LendKey caps out at 15 years.

SoFi logo

Apply Now

*referral link

Earnest

If you have a low credit score but have potential to earn a good income, Earnest will treat you well. Earnest looks beyond a simple credit score. The application process examines employment history, future earning potential and overall financial situation.

Earnest seems to take a very personal approach to each customer. A customer states an amount they can pay each month and Earnest will give them a loan, accordingly. Earnest also lets borrowers skip a payment each year. This could come in handy if money gets tight around the holidays. Just keep in mind, this can increase your future payments to compensate for the missed on.

Fixed interest rates start at 3.50% and variable interest rates start at 2.15%.

However, Earnest isn’t available for all US residents.

Earnest

Apply Now

Final Thoughts

LendKey runs a fantastic student loan refinancing division. The company offers many, many customizable options with very few downsides. With no application fee, it’s worth seeing what this student loan refinancing powerhouse can do for you.

Lendkey

Apply Now

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Best Student Loans for Both Students and Parents

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Navigating the world of student loans can be daunting. Not only are there several criteria you should evaluate before you sign on the dotted line, but there are also different options available to you depending on where you are on your life’s journey.

Today we’ll walk through some of the best options out there depending on your current circumstances.

Students About to Enter School

Before you apply to school, you should fill out and submit your FAFSA. It’s the best way to get your hands on free grant money, work-study opportunities and federal student loans. Before taking out any student loans, you should talk to your school about any additional financial aid packages it may provide including scholarships and grants, both of which you never have to pay back.

After you’ve exhausted all the avenues for free money, you can start to consider student loans. Federal student loans are widely considered the best option as they provide opportunities like deferment, income-driven repayment and, in some cases, forgiveness or cancellation. With all of these advantages, you should max out all of your Federal student loan options prior to looking at private student loans.

Criteria for Private Student Loans

If you’ve gotten all you can from grants, scholarships, work-study and Federal loans and still don’t have enough to cover the cost of college, you may want to look into private student loans. Before taking out a loan you’ll want to evaluate:

  • Interest Rates
  • Upfront Fees
  • Grace Periods/Interim Periods
  • Repayment Assistance Options

You do want to shop for the lowest possible interest rates and avoid any loans that require fees aside from late fees for late payments, but be sure to recognize the value in the other criteria, too.

Grace Periods

Grace periods, sometimes referred to as interim periods, give you some time between graduating school and making your first payment. This gives you time to locate and secure employment. The grace period typically also starts if you drop below half-time enrollment in school. Keep in mind that interest is likely to still accrue during the grace period, so it’s wise to consider making interest-only payments during this time period.

Our favorite pick for student loans with a grace period? Discover. Discover Student Loans have a six-month grace period for undergraduate degrees and a nine-month grace period for professional degrees. If you drop below half-time, you’ll have a six-month grace period, too.

Discover Student Loans tick many of the other boxes, as well, including:

  • Competitive interest rates.
  • Zero fees (not even late fees.)
  • Flexible repayment options.
  • Repayment assistance in the form of deferment, extended grace periods and forbearance.

Explore more top picks for private student loans with grace periods

Repayment Assistance Options

Many private student loan providers are starting to offer options akin to Federal programs. Typically, these repayment assistance options will provide opportunities for forbearance and deferment, though you should read all the fine print carefully on your individual loan offer; the terminology will not necessarily carry the same meaning for private student loans as they do for federal student loans.

Discover Student Loans are top of the list for repayment assistance options as mentioned above with deferment, extended grace periods and forbearance (which isn’t always the case with private loans), but another good alternative is Citizens Bank. It offers forbearance and deferment on a case-by-case basis, so it is not as easily accessible as with Discover, but the fact that they even offer the option is still progressive.

Citizens Bank Student Loans also have a lot of other things going for them:

  • Lower interest rates.
  • No fees.
  • Repay over the course of 5, 10 or 15 years with the option to pay interest while you’re in school.
  • Six-month grace period.
  • Ability to release your co-signer from their obligation after 36 months of full, on-time payments.

Explore more top picks for student loans for future students

Options for Graduates

After you’ve graduated college, hopefully you’ll land a job that allows you to pay back your loans and then some. If that doesn’t happen, you won’t be the first person to walk the path of needing extra assistance. Even if you can afford payments, you may have taken out your loans at a time when interest rates were much higher than they are today. Here are some options to better your financial situation when it comes to the student loans you already carry.

Refinancing

Refinancing is an option for people who can afford their payments and have a steady record of being on-time. Some, though not all, lenders will also evaluate if you have a good credit score.

If your interest rates are steep, you may want to seriously look into refinancing. Be careful, though; while there is a push to be able to refinance with the government, you cannot currently refinance your federal student loans without consolidating or moving to the private sector. Doing so can disqualify you from advantageous programs such as income-driven repayment and forgiveness.

You can find which refinancing option is best for you with our comparison tool.

Income-Driven Repayment Plans

There are five major income-driven repayment plans. As we look at these plans, we’ll evaluate income eligibility, if you have to include your spouse’s income when filing taxes separately, how many years you’ll have to pay, how much you’ll pay, which loans qualify and if there is a cap to how much you’ll pay overall.

Traditional IBR (Income-Based Repayment) Plan

  • Income eligibility: Annual amount due on your loan must exceed 15% of your discretionary income, which is considered the difference between 150% of the poverty line in your state and your adjusted gross income (AGI.)
  • How much will I pay? 15% of your discretionary income.
  • How long will I pay? 25 years, after which your balance will be forgiven.
  • Is there a cap to how much I will pay? You will not pay more than you would have under the standard, 10-year repayment plan over the life of your loan.
  • Which loans qualify? All federal loans except Parent PLUS.
  • Must include spouse’s income if married filing taxes separately?

New IBR Plans (for borrowers who started taking out loans after July 1, 2014)

  • Income eligibility: Annual amount due on your loan must exceed 10% of your discretionary income.
  • How much will I pay? 10% of your discretionary income.
  • How long will I pay? 20 years, after which your balance will be forgiven.
  • Is there a cap to how much I will pay? You will not pay more than you would have under the standard, 10-year repayment plan over the life of your loan.
  • Which loans qualify? All federal loans except Parent PLUS.
  • Must include spouse’s income if married filing taxes separately?

Learn more about Traditional and New IBR Plans

ICR (Income-Contingent Repayment) Plans

  • Income eligibility:
  • How much will I pay? The lesser of 20% of your discretionary income or what you would pay on a fixed, 12-year repayment plan adjusted to your income.
  • How long will I pay? 25 years, after which your balance will be forgiven.
  • Is there a cap to how much I will pay? You could potentially end up paying more over the life of your loan than you would on a standard, 10-year payment plan.
  • Which loans qualify? All federal loans.
  • Must include spouse’s income if married filing taxes separately?

PAYE (Pay As You Earn) Plan

  • Income eligibility: Annual amount due on your loan must exceed 10% of your discretionary income, plus you must have been a new borrower after October 1, 2007 and received a disbursement on or after October 1, 2011.
  • How much will I pay? 10% of your discretionary income.
  • How long will I pay? 25 years, after which your balance will be forgiven.
  • Is there a cap to how much I will pay? You will not pay more than you would have under the standard, 10-year repayment plan over the life of your loan.
  • Which loans qualify? All federal loans except Parent PLUS.
  • Must include spouse’s income if married filing taxes separately?

REPAYE (Revised Pay as You Earn) Plan

  • Income eligibility: Annual amount due on your loan must exceed 10% of your discretionary income.
  • How much will I pay? 10% of your discretionary income.
  • How long will I pay? 20 years for undergraduate degrees and 25 years for professional degrees, after which your balance will be forgiven.
  • Is there a cap to how much I will pay? You could potentially end up paying more over the life of your loan than you would on a standard, 10-year payment plan.
  • Which loans qualify? All Federal loans except Parent PLUS.
  • Must include spouse’s income if married filing taxes separately?

Learn more about the difference between PAYE and REPAYE

Public Service Loan Forgiveness (PSLF)

If you work for the government or a non-profit with a 501(c)(3) tax classification, you may qualify for the PSLF program. In order to qualify, you must be set up and be in active repayment on one of the above income-based repayment plans and work enough hours at one or several qualifying employers to be considered full-time.

If you qualify, your loans will be forgiven after 120 payments, which adds up to 10 years. These payments do not necessarily have to be consecutive.

If you don’t qualify for PSLF, you may want to look into cancellation or discharge of Federal student loans.

Parents of Current Students

If you want to borrow money to help pay for your child’s education, you essentially have two options. The first is a Parent PLUS loan from the Federal government. Parent PLUS loans are currently only available via a Direct PLUS loan.

These loans have a fixed interest rate (currently 4.272%,) cannot be transferred into your child’s name, and can finance all of your child’s tuition and fees less any financial aid. Because you can borrow so much money, it’s important to be sure that you can actually pay it back. For its part, the Federal government checks to make sure repayment is likely by running a credit report on you before approval.

Keep in mind that the only income-driven repayment plan you could possibly be eligible for is ICR, and that you will be ineligible for PSLF unless you work in the public sector; your child’s occupation is irrelevant. You will be notified if you qualify for this loan after you apply for the FAFSA. If your child’s school does not participate, the government will tell you so you can put a request in with the educational institution to secure this type of loan.

Your other option is to refinance with the private sector. Be savvy when applying for private student loans, utilizing the same practices suggested to your children above. Two great options for parents are SoFi and Citizens Bank.

Citizens Bank offers a Student Loan for Parents that has no application fee, can be for a five- or ten-year term, and has competitive, fixed interest rates. While your child is in school, you can make full or interest-only payments, though payments cannot be deferred completely.

SoFi provides refinancing. In order to qualify, you have to have to have a great credit history and make solid money, making this an ideal option for parents who may be further along in their careers. You cannot switch between fixed and variable rates, but rates remain competitive with those of the Federal government.

Parents of Graduates

As you well know, just because your student has earned their degree, it doesn’t mean you’re done paying for their college. If you’re carrying a Parent PLUS loan, especially if it has an interest rate on the higher end, you may want to look at refinancing.

Because the only income-driven repayment plan you are eligible for with a Parent PLUS loan is ICR and you’re only eligible for PSLF if you work in the public sector, there aren’t quite as many consequences for you if you refinance in the private sector. ICR can be beneficial for parents approaching, or already in, retirement as it sets your payments based on your income. Federal student loans, including Parent PLUS loans, won’t be passed on to a child upon your death. Private student loans are not always so generous, so be sure to read the fine print of your agreement.

That doesn’t mean you should skip doing the math, though. Keep the length of the loan as similar to what you already have as possible, and then shop for a lower interest rate.

One great option for parents who are refinancing a Parent PLUS loan is the DRB Parent PLUS Refinance Program. Its interest rates are competitively low, you can request a term that will match your current pay off date and it is available in all 50 states.

If you cosigned on a loan with your graduate, you may want to look at getting released from that obligation. Doing so will not only release you from your financial responsibilities today, but it will also protect your grad from a potential financial nightmare should you pass away or for you if your child passes.

Some lenders, like Citizens Bank, will allow you to be released as a cosigner from the loan without refinancing after a certain amount of payments have been made on time and in full. With other loans, you may have to look at refinancing to get everything in your child’s name only. Three financial institutions that allow this type of refinancing are:

Read Up Now

The best time to get educated about your student loan options is before you take them out. Understand when you will have to pay them back, how competitive the interest rates are, what your repayment options will be further down the line, and how and if you can release your cosigner after you’ve established you’re a responsible party. Doing your homework now could save you hundreds to thousands of dollars further down the line.

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