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19 Options to Refinance Student Loans – Get Your Lowest Rate

19 Options to Refinance Student Loans - Get Your Lowest Rate

Updated: May 24, 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 
earnestA+

20


Years

3.50% - 7.05%


Fixed Rate

2.13% - 5.35%


Variable Rate

No Max


Undergrad/Grad
Max Loan
apply-now
SoFiA+

20


Years

3.50% - 7.74%


Fixed Rate

2.14% - 5.94%


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
commonbondA+

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. Earnest*: Variable Rates from 2.13% 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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2. SoFi*: Variable Rates from 2.14% 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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3. 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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4. CommonBond*: Variable Rates from 2.14% and Fixed Rates from 3.25% (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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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 2.18%.
  • 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 2.21% 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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Student Loan Interest: How Does it Work When I’m in School?

mortar board cash

We all know that student loans accrue interest, but exactly how and when interest begins accruing on various types of student loans can be a confusing topic. For example, some types of loans begin accruing interest while you are still in school, while others do not. Additionally, some loans accrue interest during the grace period (the period between when you graduate, withdraw from school, or drop below half-time status, and when your first loan payment is due), while others don’t start accruing interest until after the grace period is over.

It’s important to make sure you understand when interest will begin accruing on each of your student loans, since the amount of interest that accrues can substantially impact the amount of money you ultimately have to pay back. The first step is to check whether your loans are federal or private, and, if they’re federal, what type they are (e.g. subsidized or unsubsidized). With subsidized loans, the government assists the borrower by paying the interest during certain periods.

When interest capitalization occurs

Capitalization is the process of your unpaid interest being added to the principal balance of your loan. Interest does keep accruing after the capitalization process occurs, but the first one is likely to happen after your grace period on student loans is up.

Here is a rundown of the different types of student loans, along with notes about when each one begins accruing interest. You can find additional information about federal student loan interest at the Federal Student Aid website.

Federal subsidized loans

These loans are available to students who have demonstrated financial need.

  • Does interest accrue while I am in school? No.
  • Is there a grace period? Yes, six months.
  • Does interest accrue during the grace period? If your subsidized loan was disbursed between July 1, 2012 and July 1, 2014, it will accrue interest during the grace period. If it was disbursed before or after this period, it will not accrue interest during the grace period. Keep in mind that this could change again for future loans though.

Federal unsubsidized loans

These loans are available to students regardless of whether financial need has been demonstrated.

  • Does interest accrue while I am in school? Yes.
  • Is there a grace period? Yes, six months.
  • Does interest accrue during the grace period? Yes.

Federal PLUS loans

These loans are disbursed to students and parents of students in cases where the cost of a higher education program is not covered by other loans or forms of financial aid.

  • Does interest accrue while I am in school? Yes.
  • Is there a grace period? Student borrowers have a grace period of six months. Parent borrowers are expected to make payments as soon as the loan is disbursed but may request that payment due dates be delayed until after the student has graduated or left school.
  • Does interest accrue during the grace period? Yes.

Federal Perkins loans

These loans are available to students with “exceptional financial need”.

  • Does interest accrue while I am in school? No.
  • Is there a grace period? Yes, nine months.
  • Does interest accrue during the grace period? No.

Private loans

These are loans through banks or other private lenders rather than through the federal government, which means that the terms of the loan may vary depending on your specific lender. It’s important to check with your lender to get accurate information about the details of interest accrual and repayment requirements. Many private lenders may not offer a grace period, and interest will likely begin accruing while you are in school, but check with your lender to be sure.

What you should do to minimize accruing interest while in school

Minimizing the amount of interest that will capitalize is an effective way to reduce the total amount you’ll pay back over the life of the loan. The interest keeps on accumulating after the initial capitalization (principal + unpaid interest), so the lower the amount added to the principal balance, the less you’ll be charged in interest.

Here are a few ways to reduce the interest capitalization.

Work while in school

The action of working alone won’t do much, but it can give you money to pay off at least the interest accruing on your loans. You may even be able to save up enough to take out smaller loans the next year – or better yet – no loans at all. Be sure to explore all the work opportunities on campus, especially jobs that offer tuition assistance such as working as a resident advisor.

Make interest-only payments during school and/or the grace period 

Don’t wait until graduation and after the grace period to start making payments. You can use your money earned working during the school year, or the summers, to make interest-only payments. You can also make more significant payments towards the principal balance if you have the funds. Interest-only payments are a smart way to get ahead of your post-graduation student loan burden. These payments allow you to start paying off the interest as it accrues instead of waiting for it to capitalize on the principal debt.

If you have a subsidized loan, then you should definitely start making payments because you’ll be chipping away at the principal balance. 

Return excess loans

Did you take out more loans than you needed? You might be able to battle your student loan buyer’s remorse. You typically have 120 days after your loans have been disbursed to return the money to your lender; however, you should double-check the fine print as your school may have a shorter timeline to help you with the process.

It can be really tempting to cover your cost of living with student loans, but it’s a move that will cost you dearly in the future. Make an effort to only borrow what you truly need to pay for college instead of using funds to buy coffees between classes, go out to bars with friends and decorate your dorm room.

Pay more than the minimum due

The final strategy helps you attack your interest once those payments come due. Make an effort to pay as much above the minimum payment as possible and be sure to tell your lender you want the extra money applied to your principal balance. The faster you pay down the debt, the less interest you’ll pay overall.

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What is a 401(k) Loan and How Does it Work?

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If you’re in need of money and your savings account balance is low, you may be tempted to use the handy little loan provision that most 401(k) plans offer. That’s right! You can probably borrow money from your 401(k). Right from your own account! It’s a nifty feature, but is it a good idea?

Today we’re going to start examining that question by diving into what exactly a 401(k) loan is and how it works. The next post in this series will look at a few situations in which borrowing from your 401(k) can work in your favor.

Let’s get into it!

Quick note: Every 401(k) plan has different terms and conditions and some plans don’t allow for loans at all. Consult your Summary Plan Description for specific details about how your plan handles loans.

What Is a 401(k) Loan?

When you borrow from your 401(k) you are actually borrowing money directly from yourself.

The loan is taken directly out of your 401(k) account balance. Then a repayment plan is created based on the amount you borrowed and the interest rate and those payments are made back into your 401(k) account, typically through an automatic payroll deduction.

In other words, you are borrowing from yourself and paying yourself back. Both the principal and the interest on the loan eventually make their way back into your 401(k).

How Much Can You Borrow?

Figuring out how much you can borrow from your 401(k) can be a little tricky, but here’s a quick summary.

If you haven’t had any outstanding 401(k) loan balance within the past 12 months, you are allowed to borrow the lesser of:

  • $50,000, or
  • 50% of your vested 401(k) balance. If that amount is less than $10,000 then you can borrow up to $10,000, but never more than your total account balance.

Sounds simple, right? But wait, there’s more…

If you have had an outstanding 401(k) balance within the past 12 months, the amount you’re allowed to borrow is reduced by the largest balance you had over that period.

Let’s look at a few examples:

  • Example #1: Joe has $25,000 in his 401(k) and has not had a 401(k) loan balance within the past 12 months. He is allowed to borrow up to $12,500.
  • Example #2: Theresa has $15,000 in her 401(k) and has not had a 401(k) loan balance within the past 12 months. She is allowed to borrow up to $10,000.
  • Example #3: Becca has $150,000 in her 401(k) and has not had a 401(k) loan balance within the past 12 months. She is allowed to borrow up to $50,000.
  • Example #4: Steve has $25,000 in his 401(k) and did have a 401(k) loan balance of $5,000 within the past 12 months. He is allowed to borrow up to $7,500.

What Is the Interest Rate?

Each 401(k) plan is allowed to set their own loan interest rate. You should consult your Summary Plan Description or ask your HR rep for details about your specific plan.

However, the most common interest rate is the prime rate plus 1%.

What Can the Money Be Used For?

In many cases there are no restrictions on how you use the money. It can be put to work however you want.

But some plans will only lend money for certain needs, such as education expenses, medical expenses, or a first-time home purchase.

How Long Do You Have to Pay the Loan Back?

Typically, your 401(k) loan must be paid back within 5 years. If the loan is used to help buy a house, the term may be extended up to 10-15 years.

The catch is that if your employment ends for any reason, the entire remaining loan balance is typically due within 60 days. If you aren’t able to pay it back within that time period, the loan defaults.

What Happens If You Default on the Loan?

A 401(k) loan defaults any time you aren’t able to comply with the terms of the loan. That could be failing to make your regular payments or failing to repay the remaining loan balance within 60 days of leaving the company.

When that happens, the remaining loan balance is counted as a distribution from your 401(k). That has two big consequences:

  1. Unless you’re already age 59.5 or meet other special criteria, that money will be taxed and hit with a 10% penalty.
  2. The defaulted amount is not eligible to be rolled over into an IRA or other employer retirement plan. So there’s no way to avoid the taxes and penalty.

The good news is that the default is not reported to the credit bureaus and therefore has no impact on your credit score. Though if you’re applying for a mortgage or other loan, the lenders may ask about any 401(k) loan defaults and factor that into their decision.

How Do You Apply for a 401(k) Loan?

And as long as you have a vested 401(k) balance, the process loan application process is typically pretty simple.

Other than adhering to any specific restrictions your plan may enforce (see above), it’s usually as easy as requesting the loan. That can often be done online or at worst with a little paperwork through your human resources department.

There is no credit check for 401(k) loans, which can make them easier to get than other types of loans. And loans must be available to all employees, so you should be able to get approved no matter what your position is in the company.

Other Considerations

Here are a few other things to consider as you weigh the pros and cons of taking out a 401(k) loan:

  • Other than the possibility of default, the biggest potential cost is the missed investment returns while the money is out of your 401(k). Depending on the size of the loan and the market returns during the life of the loan, that could be significant.
  • Your spouse often has to sign off on the loan.
  • You can have more than one 401(k) loan out at a time, but the total loan balance can’t exceed the limits described above.
  • There may be a fee involved with taking out the loan.
  • Your loan payments do not count as 401(k) contributions, and your employer may or may not allow you to keep contributing to your 401(k) while your loan is outstanding.
  • Because the loan is not reported to credit agencies, a 401(k) loan is not a way to build your credit history or increase your credit score.
  • You typically cannot take a loan from a 401(k) you still have with an old employer.

Is a 401(k) Loan a Good Idea?

Those are the nuts and bolts of 401(k) loans, so is taking out a 401(k) loan a good idea? The answer is a definite maybe. There are times where it can be the best option, times where it’s a bad idea, and times where it can actually increase your overall investment return. Regardless, you should be sure to do a deep analysis and determine if you will definitely be able to pay the loan back in a timely manner before utilizing the 401(k) loan.

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Obama Administration Reaches out to Americans with Disabilities and Student Loans

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The Obama administration recently announced a new plan to ensure that permanently disabled Americans with outstanding federal student loans are able to easily apply for student loan discharge.

The process of applying for loan discharge due to permanent disability has been available in its current form since 2012, but only a small percentage of eligible individuals have actually applied. The new initiative set forth by the Department of Education will actively identify and reach out to individuals who are eligible for Total and Permanent Disability (TPD) loan discharge, to let them know about this option and help guide them through the necessary steps. Letters containing this information will be sent out over the next several months to eligible individuals, and follow-up letters will be sent after 120 days if no response is received.

However, if you do not receive a letter from the Department of Education but believe you may be eligible for TPD loan discharge, you can apply on your own by using the online form found here. If you’d prefer, you can also request that a paper version of the application be sent to you by calling (888) 303-7818 (seven days a week between 8am and 8pm Eastern Time), or emailing DisabilityInformation@Nelnet.net.

You must include supporting documentation along with your application. This documentation must consist of one of the following:

  • If you are currently receiving either Social Security Disability Insurance or Supplemental Security Income benefits, you can submit documentation of the award for these benefits.
  • If you are a veteran and your disability is a result of your service in the U.S. military, you can submit documentation from the Department of Veterans Affairs stating that your disability prevents you from being gainfully employed.
  • If you have neither of the above types of documentation, you can obtain documentation from a certified physician stating that you have a permanent disability that prevents you from being gainfully employed.

The application and supporting documentation should be mailed to:

U.S. Department of Education
P.O. Box 87130
Lincoln, NE 68501-7130

The Department of Education estimates that most applications will be processed within 30 days. While your application is under consideration, your obligation to repay your student loans will be suspended.

The Obama administration is aiming to reach as many eligible Americans as possible, so if you know someone who might qualify for TPD loan discharge, please forward this information to them. More information about the TPD loan discharge application process is available here.

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Student Loan Repayment for Health Researchers

Student Loan Repayment

Did you know that if you’re a health professional with an advanced degree such as an MD, PhD, PsyD, or PharmD, the National Institutes of Health (NIH) may be willing to repay up to $70,000 of your student loan debt over a two-year period?

NIH, the U.S. government agency responsible for overseeing human health research, currently manages a group of eight Loan Repayment Programs (LRPs). These LRPs are used to repay lenders for the existing principal and interest on loans. The catch, si that your loans must have been obtained from a qualifying lender (more details below).

The LRPs are meant as incentives for professionals who demonstrate the commitment and expertise to pursue a career in biomedical or bio-behavioral research but still owe a substantial amount in student loan debt. NIH recognizes that the high cost of education may cause many highly qualified individuals to pursue more lucrative careers in industry or private practice rather than in research, and hopes that a reduction in student loan debt may turn the prospect of a research career into a more attractive option.

What happens when you receive an award

All awards last for two years. If you receive an award, you are contractually obligated to engage in an average of at least 20 hours of research per week, funded by a U.S. non-profit such as a university or hospital.

How much can you receive?

All awards last for two years and during that time NIH will repay 25% of your eligible education debt (up to $35,000) for each of those years. For example, if you have $40,000 of qualifying educational debt, the LRP will give you $10,000 per year (25% of your total debt), for a total of $20,000 over the two-year period. Awardees can also apply to have their awards renewed after the two years are up.

Types of LRPs

You must also choose which one of the eight LRPs you wish to apply for; this choice will depend on what type of research you are planning to pursue. You may either choose research within the NIH (Intramural) or outside the NIH (Extramural) Specific LRP areas of research include:

Are you eligible?

In order to be eligible to apply for an LRP, you must possess an advanced professional degree and have demonstrated the potential for a successful research career. Additionally, your student loan debt must exceed 20% of your base salary at the institution where you are employed at the time of the award.

Your loans must also be eligible for the repayment program.

Loans that are eligible

A majority of the loans you have likely taken out yourself from the government or a financial institution are eligible. Even loans taken out to cover cost of living while attending college may be eligible, if these loans are within a reasonable amount. According to the NIH website, the following loans are eligible:

  • Undergraduate, graduate, and health professional school tuition expenses;
  • Other reasonable educational expenses required by the school(s) attended, including fees, books, supplies, educational equipment and materials, and laboratory expenses; and
  • Reasonable living expenses, including the cost of room and board, transportation and commuting costs, and other living expenses as determined by the Secretary.

However, your loans will be ineligible if you’ve consolidated with another person such as a spouse or child. Loans will also be ineligible if you’ve merged with with non-educational loans.

Loans that aren’t eligible

  • Loans that are delinquent, in default or not on current repayment schedule.
  • Loans already paid in full, meaning you can’t get your money back retroactively for loans you’ve paid off.
  • Parent PLUS loans.
  • Loans consolidated with another individual such as spouse, child or those consolidated with a non-educational loan.
  • Loans not obtained for educational purposes, even if you used them for education, such as a home equity loan.
  • Loans not from the U.S. government, a U.S. academic institution, a U.S. commercial or chartered lending institution, such as loans from friends or family.
  • Loans without eligibility documentation that is submitted in PDF form or print outs. This documentation includes:
    • Account statements less than 30 days old. You can find a sample account statement here.
    • Promissory notes/Disclosure statements for non-consolidated loans and consolidated loans. You can find a sample note here.
    • Consolidated loans will also require a complete list of loans that were consolidated. You can find a sample note here.
    • National Student Loan Data System Aid Summary and Detail Loan information reports.
  • Loans that exceed the reasonable level for educational or living expenses. Reasonable level is determined by the standard school budget for the year in which the loan was made.
  • Loans or financial debts that you received as a result of failure to satisfy a service obligation including but not limited to: Armed Forces Health Professions Scholarship, Indian Health Service Scholarship Program and National Institutes of Health Undergraduate Scholarship Program (UGSP).
  • Loans you take out after accepting a LRP from NIH.

Learn more about loan eligibility here.

How loans get repaid when you have more than one

You probably have student loan debt from more than one source, so you may be wondering how these debts will get prioritized by the NIH? Unfortunately, you won’t be able to do what you want with the LRP money. Instead, the NIH will determine the order in which loans are repaid based on the following priorities. Unfortunately, this does mean you can’t make repayments based on interest rates or loan amount.

Priority One

Loans guaranteed by the U.S. Department of Health and Human Services, these include:

Health Education Assistance Loans (HEAL)
Health Professions Student Loans (HPSL)
Loans for Disadvantaged Students (LDS)
Nursing Student Loans (NSL)

Priority Two

Loans guaranteed by the U.S. Department of Education, these include:

Direct Loans
Stafford Loans
Consolidation Loans
Perkins Loans
Graduate PLUS Loans (on or after July 1, 2006)

Federal Family Education Loans (FFEL)
Stafford Loans
Consolidation Loans

Priority Three

Loans that have been made to you or guarnateed by your State, the District of Columbia, the Commonwealth of Puerto Rico or a territory or pession of the United States (for example, Guam).

Priority Four

Loans made to you by an academic institution

Priority Five

Private (Alternative) Educational Loans:

MEDLOANS
Private (non-guaranteed) Consolidation Loans

How to apply

You can register and start the application process by registering here on the NIH website. The application cycle is typically open from September 1 to November 15 of each year.

The application process is long, extensive and competitive. The NIH provides an outline of tips for how to write a strong application as well as a road map to follow to ensure you’re checking off all the steps.

What you’ll need

  • Letters of recommendation
  • A research plan
  • Mentor who provides a mentoring plan
  • Demonstrate your qualifications and commitment
  • Verify your research is within the scientific method of the NIH Institute or Center to which you are applying
  • Loan documentation
  • Estimate quarterly LRP repayment

Tax implications

Unfortunately, this isn’t like forgiveness programs and your LRP loan repayments will be counted as taxable income. This could, and likely will, have significant implications for your tax bill. You’ll receive a form 1099-G if you have an Extramural LRP and a W-2 if you have an Intramural LRP.

Fortunately, the LRPs do help offset this tax burden by making a tax payment to the IRS that’s equal to 39% of the annual LRP repayment. If you owe an additional amount, then it will be your responsibility to pay.

Who should apply?

So if you’re a young researcher who is interested in a career in biomedical or biobehavioral research but are concerned about whether such a career will allow you to pay off your student loan debt in a timely fashion, consider applying for an LRP. While these awards are considered to be competitive, NIH states that approximately 1500 individuals have received awards each year thus far. Additional information on eligibility and the application process can be found at the NIH Division of Loan Repayment website.

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Best of, College Students and Recent Grads

Top 5 Checking Accounts for College Graduates

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When you open your first bank account as a kid, you’re not thinking about fees. You’re just excited to swap your piggy bank for a debit card. That first bank account may even stick with you up until college. That doesn’t mean it’s the account you should keep for the long haul.

Some checking accounts give you a break on fees while you’re a student, but after you get a diploma or turn a certain age these bank accounts get expensive. For example, Bank of America waives the $12 monthly fee on its checking account for students under 23 years old. After graduation, that’s an extra $12 per month you’ll want to keep your hands on.

If you have a checking account that will phase you out of a discount, it’s time to shop around for accounts with the lowest possible fees. Here are six checking account alternatives college graduates should consider:

1.Charles Schwab Online Checking

No Monthly Fee, ATM Fee Reimbursement Worldwide

charles-schwabCharles Schwab has no fees or account minimums. This account comes with free checks and bill pay. You can connect your Charles Schwab online checking account to Apply Pay for purchases if you have an iPhone 6 or iPhone 6 Plus. Deposits can be handled remotely through Schwab check deposit.

Where this checking account stands out from other accounts below is it has an unlimited fee rebate for cash withdrawals at ATMs worldwide. Charles Schwab will reimburse you every time you use an ATM that charges a fee. This makes it ideal for those planning to travel frequently.

Apply Now

 

2. Ally Bank Interest Checking

No Monthly Fee, ATM Fee Reimbursement Up to $10 Per Month

allyAlly Bank offers an online checking account without monthly maintenance fees. There’s also no minimum balance required. You’ll get charged certain fees in unique situations. For instance, an overdraft will cost you $25. To avoid an overdraft, you can set up free automatic transfers from another account. This means free overdraft protection, which isn’t the case at many banks that will charge you $10 to move your money from savings to checking.

If you’re used to walking into a bank to manage your money, you won’t get the same experience with this online account or any of the other online checking accounts on this list. But, managing your money is still easy. Ally Bank allows you to deposit money remotely using Ally eCheck. You can also transfer money between Ally bank accounts or sign up for direct deposit to put money into your account.

For withdrawals, you can use Allpoint ATMs in the U.S. for free. If you use an ATM that’s not Allpoint, Ally Bank will reimburse you ATM fees up to $10 per billing cycle.

Apply Now

 

3. Bank of Internet USA Essential Checking

No Monthly Fee, Unlimited ATM Fee Reimbursement in the U.S.

bank-of-internet-usaThe Essential Checking account offered by Bank of Internet USA has no monthly fees as well. There are no fees for overdraft or insufficient funds. If you try to make purchases without enough funds in your account, your card will simply be declined.

Withdrawing money from this checking account is convenient and cheap. You can use any ATM in the U.S. and Bank of Internet USA will reimburse the ATM fees. No need to hunt for a specific ATM to get free cash.

Apply Now

 

4. BankMobile Totally Free Checking

No Monthly Fee, ATM Fee Reimbursement With Conditions

bankmobile picBankMobile has a checking account with no fees or a minimum balance requirement. When it says no fees, it seriously means no fees. You can use the BankMobile app to deposit checks via remote deposit and you can set up direct deposit. For withdrawals, BankMobile has a map where you can locate STAR surcharge free ATMs.

If you have at least $500 deposited into your account each statement period, you can join the BankMobile VIP program. With VIP membership, every ATM in the U.S. becomes free.

Apply Now

5. Capital One 360 Checking

No Monthly Fee, ability to deposit cash, Doesn’t reimburse ATM fees

capital-one-360The 360 Checking account from Capital One has no fees. There’s no minimum balance required either. You have two options for overdraft protection. Connect your checking account to a savings account and have funds transferred automatically when your cash runs low. Or you can apply for an overdraft line of credit. Of course, with a line of credit interest will apply to your balance.

Deposits can be easily made through the mobile app, direct deposit or by sending a check. You get access to free cash withdrawals from 38,000 Allpoint ATMs and Capital One ATMs. If you use an ATM out of the network you may get charged by the bank you withdraw money from and these charges are not reimbursed.

A unique feature of the Capital One 360 Checking account is the ability to deposit cash at many ATMs. Not many Internet-only banks offer the ability to deposit cash. Before signing up for this account purely for this reason, you should guarantee an ATM near you allows you to deposit cash.

Apply Now

Which is the right checking account for you?

All of these accounts are insured by the FDIC up to $250,000. But, if banking online only still makes you a little nervous, the 360 Checking account is a good pick. With this account you can visit a Capital One branch for some account services like disputing transactions and changing your account information. Otherwise, Charles Schwab and Bank of Internet USA have the potential to save you the most money if you routinely frequent ATMs.

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College Students and Recent Grads, Pay Down My Debt

CFPB Payback Playbook Might Reduce Student Loan Stress

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The amount of student loan debt in the United States is crushing in size, second only to mortgages. More than 41 million Americans owe more than $1.2 trillion collectively, according to the Consumer Financial Protection Bureau.

And those millions of borrowers have a big complaint: Student loan servicers aren’t providing basic information necessary to help borrowers repay their loans. “Many federal and private loan borrowers report experiencing serious problems accessing affordable repayment options or other repayment alternatives to avoid default,” said a September report from the CFPB. In fact, the report found that one out of four borrowers struggled to repay loans or was already in default.

Enter the Payback Playbook—the CFPB’s new proposal to help address this problem. As proposed, the Payback Playbook would be information that a loan servicer would provide, and it would clearly outline a borrower’s alternative repayment options on a loan. The info might be found online when the borrower logs into her student loan account, or in her monthly bill.

You can see an example at consumerfinance.gov/payback-playbook, and the CFPB is soliciting feedback on the Playbook until June 12, 2016. You can provide your feedback here.

“We’re asking the industry and consumers to weigh in on where they think it would be most helpful, and what information they need most,” says Moira Vahey, a spokesperson for the CFPB.

For instance, when would borrowers find it best to see personalized information on repayment options—during repayment or during a grace period? And what specific information would they like to see? “We also have a different prototype if you’re about to default,” Vahey says. “Those are all things we’re taking into consideration.”

One Department of Treasury report last year found that 70% of people in default on their student loans were eligible for income-driven repayment. “Once you’re in default on a loan, it can ruin your credit and future credit opportunities,” Vahey says. The fact that so many of the people in default could have opted for a more affordable repayment option—and didn’t—was one of the things that led the CFPB to take a closer look at the issue.

“The Payback Playbook would help ensure that people have the information they need to make decisions on what repayment plans are best for them,” Vahey says.

Once the CFPB has gotten feedback from borrowers and industry professionals, they plan to work with the Department of Education to finalize the Payback Playbook, and the Department of Education has committed to incorporating this into their work.

Says Vahey: “The aim is to get this Payback Playbook onto the over 40 million student loan borrowers’ bills in the next year.”

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College Students and Recent Grads, Student Loan ReFi

My Student Loans Are Keeping Me from Buying a House

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Sam Schumacher is keeping a close eye on the real estate market where he lives, in Oakland, CA. He’d love to buy a live/work space where he could put a studio for his hand-blown glassware company, Rocket Glass Works, and also cook himself dinner at night.

Currently he pays rent on a house he shares with three roommates, and he also rents studio space at a cooperative for his business. “I pay a daily rental rate for every day where I do production work in the studio, which is about $300 a day,” says Schumacher, 26. “So I do as much work as I can out of my house. I have a little studio carved out in our living room where I store inventory and do packing and assembly. No molten glass there.”

Unfortunately, although he’s keen to combine his two spaces, it’s probably going to be a while before he can contemplate a down payment.

Squeezed by student loan debt

That’s because Schumacher graduated from college five years ago with a degree in political communications and just over $70,000 in student loans, most of them private. His payments are now $650 a month—and will be for the next 20 years if he sticks with the payment schedule.

“Even though I got into several other good public schools, and I even got offered a full ride with a stipend at another school, I was totally in love with Emerson College, where I ended up,” Schumacher says. “As a foolhardy 17-year-old, I said, ‘You know what, I’m not going to let money influence this decision. This is my education; I’m not going to worry about it if I have to go into debt.’ Now it looks a little different on the other side of things.”

Although he’s applied for refinancing, his most recent request was denied. In the meantime, he’s paying between 9% and 11.75% in interest on the loans and struggling to set savings aside for anything else.

“At this point, I can’t even fathom holding onto any money when I could be putting it on my loans,” he says. “Because of the interest rate, it just doesn’t make any sense.”

Trying to pay it off faster

He briefly moved in with his parents to try to pay his loans off more quickly, and although he shaved $20,000 off his total bill, he couldn’t stay there forever. Now he works four jobs other than running his own business. “I run around a lot, basically trying to fill my days with as much work as I can take on,” Schumacher says. “That means 13 to 14 hour days are pretty regular for me right now, and very few days off.”

He’d love to buy a property he could use as a home and studio in the next few years, but concedes that it might only be possible if his parents help him with the down payment. And even then, he’s not sure he can justify the purchase. “It’s this weird balancing act,” he says. “Is it worth it to be putting money into a mortgage when I still have all this debt?”

But in the end, he sees buying property as an important investment for his personal and financial future. “I think it makes a lot of sense in the long term,” he says. “I’m just trying to scramble and figure out a way to make it happen.”

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College Students and Recent Grads

Why You Should Think Carefully Before Applying For Income-Driven Repayment

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If you have federal student loans, then you’ve surely heard about income-driven repayment plans. Income-driven repayment plans, a collection of federal programs that allow graduates to lower their monthly student loan payments to a level that is manageable relative to their income, is one of the most well-known features of federal student loan repayment, and understandably so. When I took out my first federal student loan in 2007, I remember finding it incredibly reassuring to know that income-driven repayment options existed. It felt as though the federal government was putting its hand on my shoulder and saying, “Don’t worry, we’ll make sure that you are always able to make your payments, no matter what.”

It can be a life raft

And it’s true: if you really can’t make your monthly payments, income-driven repayment is a great option. I took advantage of income-driven repayment back in 2009, when I was $28,000 in student debt and (thanks to the recession) the only job I had been able to find after graduation paid me a whopping total of $18,000 a year. My standard monthly payments would have been several hundred dollars, a huge percentage of my take-home pay; however, income-driven repayment allowed me to bring this amount down to $98 a month. $98 a month was still a lot of money, but it was manageable, and I remember feeling grateful and relieved that I could now make my payments and also pay rent and buy gas and groceries. In situations where you feel like you’re drowning in student loan payments, income-driven repayment plans can act as a life preserver.

But isn’t right for everyone

However, just because you qualify for income-driven repayment doesn’t necessarily mean you should take advantage of it.

Let’s say you owe $50,000 in Federal Direct student loans and make $50,000 a year. You can calculate your options for income-driven repayment using the calculator available at the Federal Student Aid website. The calculator asks for the amount you owe, your interest rate, your adjusted gross income, your family size, and your state of residence. In addition to the debt and AGI details above, I put in an interest rate of 6.8 percent, a family size of 1, and selected my own state, Massachusetts.

According to the calculator, if you were in this situation, your standard loan payment would be $575 a month. However, you would also be eligible for all four types of income-driven repayment: The Revised Pay As You Earn Repayment Plan (REPAYE), the Pay As You Earn Repayment Plan (PAYE), the Income-Based Repayment Plan (IBR), and the Income-Contingent Repayment Plan (ICR). While each of these plans differs a bit from the others, each one would allow you to start off with a monthly payment lower than the standard $525. IBR, for example, would lower your starting monthly payment to $402. REPAYE would lower your starting monthly payment even more, bringing it down to $268.

At first glance, this looks great! After all, who wouldn’t want to have their monthly payment temporarily lowered by several hundred dollars? That’s several hundred extra dollars in your pocket, right?

The importance of understanding interest

Well, kind of. But your monthly payment isn’t the only thing that income-driven repayment adjusts. Selecting a lower starting monthly payments will also change the total amount you will pay over the entire period of loan repayment, as well as how many months it will take you to repay the loan. If you go with the standard repayment plan, your lifetime total for that original $50,000 will be $69,048 and you’ll be debt-free in 120 months. If you choose the IBR option, your lifetime total payments will add up to $75,057, and you’ll be debt-free in 144 months. And if you choose the IBR option, your lifetime total payments will add up to $92,481, and you’ll be debt-free in 204 months.

Clearly, these are huge differences. While income-driven repayment options may seem like the best option right now, they do not stop interest from accruing, and over time this interest can add up in a major way.

It is therefore worth thinking carefully about how much you can realistically afford to pay each month. If you’re making $50,000 a year, then your take-home pay, depending on your federal and state withholdings and contributions to benefits, might be somewhere around $2,800 per month. By applying for income-driven repayment, you would basically be saying that you cannot live off of $2,225 per month (that’s $2,800 minus the $575 standard monthly payment).

But is that really true? Can you really not live off of $2,225 per month? And, more to the point, is having a few hundred extra dollars in your pocket each month worth paying potentially over $20,000 more in interest over the course of your repayment? Can you lower your living expenses a little—perhaps go out to eat less, quit your gym membership, or get a roommate—to save yourself money in the long run?

And what if you can live off of even less and make even bigger payments? For example, if you lived extremely frugally and paid $1000 per month towards your loans, you’d be debt-free in 59 months and would only end up paying $58,956 in total. $1000 per month may sound like a lot of money—and it is. But if you can make it work, you’ll be saving yourself thousands in the long run.

In short, while income-driven repayment plans can be a good option in some situations, it’s important to remember that they do not keep interest from accruing. The bottom line is, the bigger the payments you can make on your loans, the sooner they will be paid off, and the less you will have to pay in total over the lifetime of the loan.

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College Students and Recent Grads, Student Loan ReFi

5 Options for Enlisting in the Military to Pay for College

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Lacey Langford was taking classes at a local community college when she realized she’d rather work full-time to save money for school. “My father was an Army officer, and I decided I wanted to join like him,” says Langford, now 38, who lives in Summerfield, NC. “He convinced me to at least talk to the Air Force recruiter. That was it. I realized it would be better for me and I committed to the Air Force.”

Three years into her active duty, Langford started taking classes at night, using the Air Force’s Tuition Assistance program and the GI Bill. She later separated from the Air Force and completed her degree at the University of North Carolina at Wilmington. She estimates that the GI Bill paid for 100 percent of her tuition, 85 percent of her books, and about 40 percent of her room and board expenses. “I am happy with the way it worked out, walking out of school with zero student loan debt,” says Langford, who today is a financial planner. “I also gained valuable work experience and discipline. The discipline alone has reaped major rewards.”

With the average 2015 graduate coming out of school with more than $35,000 in student loans, being able to get a degree without all the debt is appealing, to say the least. Langford’s path to tuition coverage is one way to do it, but the military offers a variety of ways to pay for schooling or even to pay back student loans. Here are a few options:

1. ROTC Scholarships

Some schools offer the opportunity to apply for a Reserve Officers’ Training Corps (ROTC) program that could pay for nearly all of your tuition, fees and books charges for four years of school, in exchange for a commitment to enter the service as a commissioned officer when you graduate. You generally promise to serve for at least four years post-graduation. There are also two- and three-year scholarships available, depending on how many years you have left in school. Each branch of the military has their own information and program.

2. Montgomery GI Bill

During basic training, recruits get the chance to sign up for this GI Bill plan, paying for it with $100 a month during their first year in the service. Once enrolled, however, eligible members can receive a monthly stipend while attending classes, based on their active duty status and how long they’ve served. For instance, effective October 1, 2015 through September 30, 2016, those who have completed an enlistment of three years or more and enrolled in full-time school qualify for a monthly stipend of $1,789. Rates generally go up every year.

3. 9/11 GI Bill

Any veteran with at least 90 days of active duty after September 11, 2001, with an honorable discharge, is eligible to take advantage of this benefit. The biggest benefit goes to those with at least three years of active duty service. For those with three years of active duty service and attending a public school, the 9/11 GI Bill will pay up to 100% of tuition and fee payments for an in-state student. For private or foreign school attendees, payment is up to $21,970.46 per academic year.

4. Tuition Assistance

Each branch of the military also offers its own tuition assistance program, in which active duty members can get money toward tuition and fees for qualified programs. The Air Force, Army and Marines offer up to $4,500 per fiscal year with caps on credit hour costs, and the Navy offers up to $250 per semester credit hour or $166 per quarter credit hour. The Coast Guard offers up to $3,375 per fiscal year. This may also be an option for you if you belong to one of the service’s Reserve units.

5. Student Loan Repayment

If you’ve already incurred student loans, you may be able to enlist in the military and have them paid off over time. Each branch offers its own program for this. The Army and Navy, for example, will repay up to $65,000 of a soldier’s qualifying student loans, and the Air Force will repay up to $10,000. Generally, after each year of completed active duty, your service will pay 33-1/3 percent or $1,500, whichever is greater, of your total unpaid balance.

There are other programs that may assist with school costs or loan repayment, depending on your position, active duty status and career field. You can get more information on all programs at military.com/education, or find specific information from the military branch you’re interested in.

A word of caution

Although these are all valid pathways to an education without massive student loan debt—or any debt at all in some cases—experts advise that students shouldn’t join the military for the tuition assistance alone. “There are people for whom the military is great, but for some people, the military is just not for them,” says Ryan Guina, founder of TheMilitaryWallet.com, who used the military’s Tuition Assistance program to get his degree while on active duty with the Air Force. “If you’re going to join for a specific benefit, make sure all the other aspects are in line with your values and what you’re looking for out of life. I encourage people to look at the military as a whole and not just a means to an end.”

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