Reviews, Student Loan ReFi

4 Best Parent PLUS Loan Refinance Options

Advertiser Disclosure

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

mortar board cash

Updated December 22, 2016

Are you a parent who is still repaying student loans taken out to help your children finance their education? While rising student loan debt totals are concerning for graduates, Parent PLUS loans can be troubling for those in their 40s and 50s trying to plan for retirement.

If you’re in this situation, you should consider refinancing your PLUS loans to lower your interest rate and make the loan more affordable. Direct PLUS loans have had interest rates ranging from 6 – 8% over the last few years, and many refinance programs have rates as low as 2% – 4%. Refinancing can save you hundreds of dollars per month.

Below are the best Parent PLUS refinance programs currently available. We encourage you to check each one out to see which suit your needs the most. You should shop around with each lender with whom you think you can qualify. All credit inquiries made within a 30-day period count as one inquiry in the eyes of the credit bureaus.

A Word of Warning on Refinancing

Thankfully, most student loan refinance programs and Parent PLUS refinance programs don’t have fees associated with the loan, so you don’t need to worry about paying origination or application fees. However, you should do the math to make sure refinancing is worth the paperwork.

If you extend your repayment term, you’ll have a lower monthly payment, but you’ll pay more over the life of the loan due to the amount of interest that will accrue. Additionally, if you’re trying to retire sooner rather than later, extending your term might not be in your best interest.

Ideally, you should find a lender willing to refinance your loan on similar terms with a lower interest rate. If your current loan balance is $10,000 and you have an 8% APR with 5 years remaining, and you refinance to a 5.99% APR with 5 years, you’ll save $568.95 on interest.

Beyond interest rates, you should also be aware that refinancing your Federal Direct PLUS loan means giving up several benefits specific to Federal student loans. Private lenders don’t offer the same repayment assistance, though some lenders are more flexible than others.

For example, you’ll no longer have access to different repayment plans, such as the Graduated, Extended Repayment Plan or Income-Contingent Repayment. Your loans won’t be eligible for forgiveness under the various Federal student loan forgiveness programs. You’ll also lose out on the benefit of forbearance and deferment, which temporarily allows you to pause payments in the event you experience financial hardship.

If you haven’t been struggling with paying back your PLUS loans, then losing these benefits might not concern you, but it’s a factor you should consider. Otherwise, if you experience difficulty making payments, you should reach out to your lender to see if any other payment arrangements can be made.

SoFi Parent PLUS Refinance Program

SoFi is one of the leaders in the student loan refinance industry, and it offers refinancing specifically for Parent PLUS loans.

  • You can refinance a minimum of $5,000 up to the cost of attendance
  • Fixed APRs range from 3.38% – 6.74%
  • Variable APRs range from 2.35% – 6.02% with autopay
  • No application or origination fees, and no prepayment penalties
  • Soft credit inquiry with pre-approval; hard inquiry once you accept the loan
  • Should have good credit, but it also takes your employment and credit history into account

 

SoFi Parent PLUS Refinance Programe45ewr

Apply Now

Citizens Bank Refinance Program

Citizens Bank doesn’t offer a separate Parent PLUS loan refinance program like SoFi does, but you can refinance any student loan under its Education Refinance Loan.

  • There’s a minimum of $10,000 with a maximum up to $170,000 depending on the type of degree your child received
  • Fixed rates: 5.95% APR to 6.55% APR (with autopay)
  • 5, 10, 15, and 20 year terms available
  • No origination, application, or disbursement fees and no prepayment penalty
  • Hard credit inquiry
  • You need a minimum annual salary of $24,000
  • You can apply with a cosigner

citizens-bank

Apply Now

DRB Parent PLUS Refinance Program

DRB also offers a Parent PLUS refinance program with low interest rates.

  • A minimum of $5,000 is required to refinance and there’s no maximum amount
  • Variable rates: 3.64% – 6.29% (with autopay)
  • Fixed rates: 4.20% – 7.20% (with autopay)
  • Terms of 5, 10, 15, and 20 years are available, though you can request a specific term under 20 years
  • Also offers a hybrid loan (mix of fixed and variable rates), but you must inquire about it
  • Child needs to have graduated college and be professionally employed
  • No origination fee or prepayment penalty
  • Available in all 50 states
  • Hard credit inquiry used

DRB Parent PLUS Refinance Program

Apply Now

CommonBond Parent PLUS Refinance Program

CommonBond is dedicated to making the refinance process as simple as possible for students, and has recently introduced a refinance program specifically for Parent PLUS loans.

  • The maximum amount you can refinance is $110,000
  • Fixed APRs range from 3.37% to 7.74%
  • Variable APRs from 2.32% to 6.18%
  • Hybrid APRs (5 years at fixed, then 5 years at variable) are offered
  • No application or origination fees, and no prepayment penalties
  • 5, 10, 15, and 20 year terms available (hybrid loans offered on a 10 year term)
  • Temporary loan forbearance is available if certain requirements are met
  • Soft credit inquiry first, then hard credit inquiry if you accept the loan then hard credit inquiry if you accept the loan

Apply Now

Keep in mind some lenders, such as SoFi, CommonBond, and DRB, offer the option to transfer your PLUS loans to your child. The Direct PLUS loan doesn’t offer this choice. It’s a great option to have if your child can handle making the payments.

There are many Parent PLUS loan refinance programs being created in wake of the success private lenders have had with refinancing regular student loans. Keep an eye out for them in case you’re not eligible for these. You can also check with your local credit union to see if they have any options available, but be sure the math works out in your favor, as some aren’t offering the best rates. Don’t forget – it’s worth shopping around for the most savings!

TAGS: ,

College Students and Recent Grads, Reviews, Student Loan ReFi

LendKey Student Loan Refinance Review

Advertiser Disclosure

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

LendKey Student Loan Refinance Review

Updated December 13, 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% – 7.26%. Variable rates start as low as 2.09%. LendKey is one of the top four lenders in MagnifyMoney’s survey of where to refinance your student loan.

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

Lendkey

Apply Now

 

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 programs, free wealth management for borrowers and even a dating app. More importantly, SoFi has low interest rates, with variable rates starting at 2.345% and fixed rates starting at 3.375%.

SoFi logo

Apply Now

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 3.38% and variable interest rates start at 2.34%.

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

Customize Student Loan Offers with Magnify Tool

 *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.

TAGS: ,

Reviews, Student Loan ReFi

Kentucky (KHESLC) Student Loan Refinance Review: Fixed APR as Low as 3.99%

Advertiser Disclosure

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

Kentucky’s student loan refinance program is operated by the Kentucky Higher Education Student Loan Corporation (KHESLC). Although the KHESLC primarily services Kentucky residents, this student loan refinance is open to residents of some other states, as well.

At present, there are over 40 million Americans repaying student loan debt. So it’s safe to say, finding the most efficient way to tackle student loan debt is at the top of many minds. Refinancing your student loans can get you a lower, fixed interest rate and consolidate multiple student loans into one easy payment.

Lenders like LendKey and SoFi have led the pack in student loan refinance products by offering some of the lowest rates around. More state-run student loan refinance programs are popping up as well to answer the call of borrowers who want to refinance their education debt for interest savings.

In this post we’ll cover:

  • The KHESLC loan terms
  • Eligibility requirements
  • Student loans you can refinance
  • Pros and cons

KHESLC loan terms

The KHESLC refinance offers fixed interest rates starting at 3.99% APR. KHESLC also offers a rate reduction of 0.50% if you make payments through auto-pay. Factoring in this discount, the lowest rate KHESLC will offer is 3.49% APR.

The loan terms are 10, 15, 20, or 25 years. The minimum amount you can refinance is $7,500.

The KHESLC refinance has no fees, including no prepayment penalty or origination fees.

Eligibility requirements

This refinance is open to residents of Alabama, Georgia, Indiana, Kentucky, Mississippi, Missouri, Ohio, Tennessee, Virginia, and West Virginia.

To qualify, you must be employed for the past 12 consecutive months, and you need a credit score above 670.

A co-signer is not required unless you can’t meet income and credit requirements. However, applying with a co-signer even if you do qualify on your own can get you a lower interest rate.

Loans that you can refinance include private student loans, graduate or parent PLUS loans, Stafford Loans, and Perkins Loans. Students can refinance their loans together with parent PLUS loans. This means parents can add their parent PLUS loans to their children’s refinance to hand over the payment responsibility.

KHESLC borrower protections and benefits

The KHESLC is a private student loan refinance. Private student loans often come with limited benefits and protections to support borrowers in times of need. However, KHESLC is noteworthy in this area. For the interest rate, you can get a 0.50% rate reduction just for using auto-pay. That’s a nice perk.

Besides a competitive interest rate, KHESLC offers:

  • Death and disability benefits
  • Forbearance
  • Graduated payment plans
  • Co-signer release

If you pass away or become permanently disabled before your loan is paid off, you and the co-signer can be released from the debt. If you’re a parent borrower and your child who benefited from the loan passes away before it’s paid off, you can also be released from the outstanding debt.

Besides the protections in tragic situations, the KHESLC refinance has a forbearance option. If you experience a period of hardship, you can request a temporary break from payments. You can get a maximum of 36 months in forbearance throughout the life of the loan term.

There’s also a graduated repayment plan that gives you a reduced payment at first and then increases the payment by 10% every two years. Before taking advantage of this perk, understand the implications of paying less up front. Paying less can lengthen your loan term and, ultimately, increase the cost of your loan.

Lastly, KHESLC allows for co-signer release. You can apply for co-signer release after you make 36 on-time, regularly scheduled payments on the loan. However, you will have to go through a credit review at the time of the release to confirm you meet eligibility criteria.

Should you refinance federal student loans?

We usually go through the typical federal student loan disclaimer when discussing refinances because understanding what you forfeit with a refinance is important.

In this case, KHESLC offers some borrower benefits and protections that can make the decision to leave your federal student loans behind less drastic.

Some major federal loan borrower benefits include forbearance, deferment, income-based payments, and loan forgiveness. Forbearance and deferment can put a pause on your student loan payments temporarily if you’re unable to pay due to economic hardship. KHESLC also offers this option.

Income-based payment plans cap your monthly payment based on your family size and income. If you’re in an entry-level job or underemployed, an income-based program can help make your monthly payments manageable.

Keep in mind, the same downside applies here as with the KHESLC graduated payment plan. Lower initial payments can stretch out your loan term. Although, for federal loan income-based plans, after making payments for 20 to 25 years any remaining student loan balance can be forgiven.

Lastly, Public Service Loan Forgiveness is a program that will forgive your federal student loans sooner than later. To qualify, you must make 120 monthly student loan payments while working in an approved public service position. It should take you around 10 years to get forgiveness. You may want to hold off on refinancing federal student loans if you’re considering public service.

You can compare what federal student loans have to offer against private student loans here.

Pros and cons

Pro: Low and fixed interest rates. The starting interest rate offered by the Kentucky refinance is as low as the student loan refinances offered by some of the most competitive lenders. We’ll talk about a few of these lenders below.

Con: Limited eligibility. This student loan refinance is only open to residents of 10 states. If you live outside of these states, unfortunately, you’re out of luck.

Pro: The borrower benefits and protections. Altogether for protections, there’s deferment, co-signer release, graduated payment, and the death and disability benefit. If you choose to refinance your federal loans with KHESLC, you can take comfort knowing there are still some backup protections in times of trouble.

Con: Forfeiting federal student loan perks. The KHESLC benefits are nice, but there are federal loan benefits like forgiveness that you would no longer have access to if you refinance.

Pro: The parent PLUS loan refinancing opportunity. Parents with parent PLUS loans can hand over the responsibility of payment to their children. Children can refinance parent PLUS loans together with their other loans using the Kentucky refinance.

Who will benefit from the KHESLC refinance?

Ultimately, borrowers who will benefit most from this refinance will be those who live in the 10 states where the refinance is offered. That’s a given. With location restrictions aside, the borrower benefits are impressive. The starting interest rate is impressive as well.

In fact, it’s right on target with other top student loan refinances available. The top 4 student loan refinances at this point are CommonBond, Earnest, LendKey, and SoFi because they offer the lowest interest rates. Starting fixed interest rates from these lenders range from 3.25% to 3.50% APR.

Of course, the lowest rates offered by all lenders are given to those who are the most creditworthy. Applying with a co-signer will give you a better chance at qualifying for a low rate with KHESLC.

You can also take the time to strengthen your credit score before applying to obtain a competitive rate with KHESLC or any other lender. Be sure to shop around with multiple lenders when looking for a refinance to get the best deal.

TAGS: ,

Reviews, Student Loan ReFi

DRB Student Loan Refinance Review

Advertiser Disclosure

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

Students throwing graduation hats

Updated November 17, 2016

DRB is a bank that offers a highly competitive student loan refinance product. In addition to the low rate, DRB offers some decent loan perks that sets it apart from others.

According to DRB, someone who refinances $100,000 has the potential to save up to $15,000 over the life of a 10 year loan. And in special circumstances like disability or financial hardship, DRB may completely forgive loans or allow for partial payments. Read on for the ins and outs of a DRB loan to see if it’s the right refinance for you.

Loan Details

DRB will refinance up to 100% of Federal, private and Parent PLUS loans. The minimum amount you can refinance is $5,000 and loan terms are available for 5, 7, 10, 15 and 20 years.

Fixed interest rates are available from 4.20% to 7.20% APR. Starting variable interest rates are available from 3.64% to 6.29% APR. If you choose a variable interest loan, the rate will fluctuate throughout the loan term depending on market conditions. Only consider variable interest if you can pay off your student loan refinance quickly. Otherwise, you might be taking too much interest rate risk since your interest has the potential to increase over time.

The interest rates above include a 0.25% discount for using auto-pay. You just need to set up automatic payment from any checking account in order to get the auto-pay discount.

[Look into refinance options on our table here.]

Loan Qualifications

You must be a working U.S citizen or permanent resident with a degree from an accredited U.S. school program to be eligible. In terms of creditworthiness, DRB requires you have the following:

  • Student loans in good standing
  • At least $54,000 of annual income
  • A credit score of 680 or above
  • A debt-to-income ratio below 40%
  • No late payments, collections or bankruptcies on your credit report

A cosigner is not required to be eligible for refinancing although you’ll probably need one if you only meet the minimum credit score or income requirements above. DRB does not have an official co-signer release program. However, a representative of DRB confirmed to MagnifyMoney that DRB will consider a co-signer release upon request of the borrower on a case by case basis.

DRB will ask for documents to backup the details of your application like photo ID, pay stubs, proof of graduation and student loan pay off statements.

Fees & Gotchas

DRB is very transparent with fees. There are no fees for origination or loan prepayment. There’s a late fee of 5% or $28 (whichever one is less) for payments that are over 15 days late. DRB also charges $20 for returned checks or electronic payments whether it’s due to insufficient funds or a closed account.

Pros and Cons

Low interest is the major pro of refinancing with DRB. Loan benefits like forbearance, deferment and loan forgiveness are other advantages. DRB may forgive loans if you die or if you can prove a significant reduction in income due to disability. Hopefully these situations don’t occur, but it’s good to know you and your family is covered if it does.

On a less morbid note, DRB offers full or partial forbearance of payments if you can prove that you’re going through financial hardship. You may also qualify to pay just $100 per month while you complete a full-time post-graduate training program like an internship, fellowship or residency. If you graduate less than 6 months before refinancing, DRB may allow you to defer payments for up to 6 months.

There aren’t many disadvantages of going with DRB other than it not having an official co-signer release program with explicit qualification terms. This may be a turnoff for cosigners since your loan will likely appear on his or her credit report until it’s repaid.

DarienRowaytonBank

Apply Now

Student Loan Refinance Alternatives

How does DRB stack up to other available student loan refinances?

SoFi has a higher rate cap for fixed interest and a higher starting rate cap for variable interest than DRB. SoFi currently offers variable rates from 2.345% APR and fixed rates from 3.38% APR (if you sign up for autopay). However, the SoFi refinance does come with a benefit comparable to DRB called unemployment insurance. If you’re laid off, SoFi will pause your payments and help you find a new job.

SoFi logo

Apply Now

CommonBond has similar rates to DRB. Fixed interest rates are available from 3.37% APR and variable interest rates are available starting at 2.32% APR (if you use autopay). Although to qualify for the CommonBond refinance you must have obtained a degree from one of the graduate programs on its eligibility list. On the other hand, DRB will refinance any loan (graduate or undergraduate) from an accredited program in the U.S.

Commond Bond bank

Apply Now

Who Will Benefit Most From This Refinance?

The DRB refinance may work out really well for people who need to complete a post-graduate training program before finding a job in their profession. Since DRB allows for reduced payments in this circumstance, you’re given some leeway until you can earn your full professional salary. Still, you should compare the benefits of any Federal loans you have to the benefits of a refinance before making a decision.Customize Student Loan Offers with MagnifyMoney tool

 *We 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.  

TAGS: ,

Reviews, Student Loan ReFi

Review: North Dakota’s Deal One Student Loan Refinance Program

Advertiser Disclosure

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

student loans college

If you don’t know much about North Dakota, it has some interesting quirks. It’s the largest producer of honey and sunflowers in the U.S. It’s home to the largest scrap metal sculpture in the world. In the past year, it has had both the largest population growth and the biggest economic contraction of any U.S. state.

North Dakota is also home to the only remaining state-owned bank in the country. The Bank of North Dakota (BND) collects all state tax revenues to redistribute into various programs. One of those programs is the Deal One Loan, which gives residents the chance to refinance their student debt at competitive interest rates.

Who Qualifies?

You must be a resident of North Dakota to qualify for this loan option. This means your primary residence has had a physical address in the state for at least the past six months. On top of being a state resident, you must also be a citizen of the United States.

If you are able to refinance by yourself, your credit score must be 700 or higher. If you cannot qualify solo, you can also look at getting a co-signer who has a minimum credit score of 600.

Co-signers can be released after 48 straight months of on-time payments as long as you meet the current credit score requirements at that time. It’s important to know Bank of North Dakota looks at your complete credit history when determining your eligibility.

The final criteria for qualifying is the loan itself. If your loan is in repayment or a grace period, you qualify, but if it is delinquent or in default, you cannot refinance through this program. Most loans are eligible, including federal, state, and private loans for both undergraduate work and graduate school. However, you cannot currently be attending school if you want to use this refinancing option.

[Look into refinance options on our table here.]

Terms

The length of the term on your loan will depend on how much you are refinancing.

If you owe…Your term will be….
Under $10,00010 years
$10,001-$20,00015 years
$20,001-$30,00020 years
$30,001 or more25 years

While terms vary depending on how much you owe, interest rates are the same across all terms. Currently, fixed interest rates sit at 4.36%, while variable interest rates are at 2.35%. If you choose to go with a variable rate, the maximum variable interest rate is 10%. If you sign up for automatic payment, you can decrease your interest rate by 0.25%.

There are no application or origination fees with a Deal One Loan. However, if you are more than 15 days late on a payment you will have to pay a late fee. The late fee will be 6% of the missed payment amount, as long as 6% doesn’t exceed $15.

It is also important to note that when you refinance federal loans, even at the state level, you will be giving up access to certain advantaged repayment options like REPAYE, IBR, and other benefits. Always make sure any refinancing program is worth forfeiting these programs for.

While these federal benefits will be lost, BND does offer some deferment and forbearance options of their own. If you find yourself unemployed, disabled, in a state of financial difficulty, or deployed as an active duty member of the armed services, you may qualify for partial or full deferment or forbearance.

These special exceptions do have guidelines, but are generally handled on a case-by-case basis.

Pros and Cons of Refinancing with BND’s Deal One Loan

Pros

  •       No application or origination fees.
  •       Extremely competitive rates, especially on longer loan terms.
  •       BND does allow for some form of forbearance on deferment in extreme circumstances.
  •       Co-signer release is available.

Cons

  •       Only available to residents of North Dakota.
  •       Late fees will be assessed.
  •       Credit score criteria may be high for some new graduates.
  •       You will lose access to advantaged programs if refinancing federal loans.

Application Process and Documents Needed

You can apply for a Deal One Loan online. Before you start the application process, make sure you have the following documentation and information:

  •       The lender’s name, current balance, loan type, account number, and interest rate of any loans you are attempting to refinance.
  •       Your Social Security number and driver’s license number.
  •       The names, addresses, and phone numbers of three separate references who live at three separate addresses.

If you do not qualify for the loan based on your own credit score, you will be provided with information to give to a co-signer at the end of the application process. The co-signer will use this information to create their own account and apply to co-sign your loan.

After you have finished the application, you will need to send in the Authorization for Release of Student Loan Information via email, fax, or snail mail. This form allows BND to confirm that the loan information that you submitted was accurate. You may also need to sign a Federal Student Loan Benefits Waiver.

After BND has confirmed and approved your loan, you will need to sign some paperwork to accept the refinancing offer. You will be given one more chance after this to change your mind, and will be required to sign the Loan Final Disclosure. Then, BND will pay off your existing loans.

How It Stacks Up

As far as state-run refinancing programs go, the Deal One Loan has some of the lowest interest rates around. The only states that compare are Kentucky, Iowa, and Rhode Island.

Kentucky’s Advantage Education Loans only offer fixed interest rates. Those rates are low, though, starting at 3.99%. However, those who are closer to the qualification line of a 670 credit score are more likely to see rates closer to 7.99%. You cannot be eligible for both North Dakota and Kentucky’s programs. Advantage Education Loans are only available to residents of Kentucky, Georgia, Mississippi, Missouri, Ohio, Virginia, and West Virginia.

Iowa’s Reset Refinance Loans do compete with North Dakota on interest rates, but they do so with a few caveats. The first is that the longer your term, the higher your interest rate will be. This means rates are only truly competitive with North Dakota on their five-year product. On that product, the interest rate is 4.25% for Iowa residents and 4.50% for non-residents, but only if your credit score is 830 or above. Reset Refinance Loans also come with a financing fee, which puts North Dakota clearly ahead.

If you are refinancing with a co-signer, Rhode Island’s RISLA Refinance Loans come in at a respectable 4.49% fixed interest rate, but, again, this is only for five-year loans. If you apply without a co-signer, that rate jumps up to 5.74%. While this program is open nationwide, North Dakota residents will still have an advantage by staying loyal to their own state’s program.

Overall, if you’re a resident of North Dakota and want to refinance after considering the loss of advantaged programs from your federal loans, staying with your own state program or shopping the private sector is likely the best way to go.

Customize Student Loan Offers with MagnifyMoney tool

 *We 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.  

TAGS:

College Students and Recent Grads, Student Loan ReFi

11 States That Make It Easy to Refinance Student Loan Debt

Advertiser Disclosure

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

Of the $1.3 trillion in unpaid student loan debt circulating in the U.S. today, a whopping $211 billion of those loans should be eligible for refinancing, according to a recent report by Goldman Sachs. Refinancing student loan debt can be best way to lower your interest rate or achieve more affordable payments.

There are a handful of private companies and banks that offer student loan refinancing options today. These companies may offer tantalizing rates of 2-7%, but they also make it exceedingly difficult for borrowers to qualify. For example, the average SoFi borrower is in far better shape than most college graduates. She earns $142,414 per year and has a credit score of 776, according to a report by credit ratings industry analyst DRBS. Meanwhile, the average 2015 college graduate earns just over $51,000 and 40% of people under the age of 30 have credit scores under under 600.

The good news is that an increasing number of states are getting into the business, providing more competition for existing refinance lenders.  This is a relatively new trend. When the federal government began issuing student loans directly back in 2010, most states got out of the student loan business altogether. Today, 11 states offer programs that allow borrowers to refinance their student loans, with about a dozen more programs in the works  Many of these refinancing programs are still in their infancy. As of December 2015 — 18 months into its launch — Rhode Island’s refinance program had only refinanced loans for 349 borrowers, according to the Pew Charitable Trusts.

Are state-run refinance programs worth it?

We decided to take a deeper look at the programs that exist today. What we found is a mixed bag of opportunities. While some states do have more relaxed standards than private lenders, many offer the best refinancing rates to borrowers who have the best credit. Most of the programs we reviewed required FICO scores of at least 670-700. The best rates are reserved for those who either have a cosigner or a top notch FICO score. And a borrower’s FICO score is just the beginning. Many programs won’t extend loans to borrowers who have a history of missing student loan payments or who have filed bankruptcy in the past. Other programs require a cosigner or ask that borrowers meet a minimum annual income threshold.

Whether borrowers are considering refinancing student loan debt through a commercial lender or a state-run program, it’s important to realize there is no silver bullet for student debt.

“Just because a loan is made by a state lender doesn’t mean that it is better or worse than a loan from a commercial lender,” says Mark Kantrowitz, a student loan expert and publisher of Cappex.com. “Borrowers should shop around, applying to several loans to see which lender will offer them the lowest cost loan.”

Refinancing federal student loan debt is an especially tricky decision to make, whether you’re considering private commercial or state-backed refi loans. College students who borrowed federal loans in the late 90s and early 2000s could easily find themselves stuck with interest rates as high as 8%. As it stands, the only way to refinance those loans to get a better rate is to apply for a federal direct consolidation loan. This loan does allow borrowers to refinance, but it merely takes the average of the interest rates of all their loans in order to determine your new rate. If their loan rates are all similar, a direct consolidation loan really won’t make all that much of a difference in the long-run.

There are other stakes to consider when it comes to refinancing federal student loan debt. When a borrower refinances their federal student loans, they are essentially swapping out federal loans for a private loan. That means they will forfeit all of the protections they have as a federal student loan borrower. They won’t be able to take advantage of flexible repayment options like PAYE, income-based repayment plans or public service loan forgiveness.

Timing is important, too. Borrowers are usually better off waiting a few years until after they graduate to pursue refinance options, Kantrowitz says. Many borrowers may need time after college to build up their credit before refinance becomes a viable option.

“It takes a few years after graduation of managing one’s credit responsibly for a borrower’s credit score to improve enough that they will qualify for a better rate,” Kantrowitz says.

Lastly, refinance or consolidation loans are not always the best ways to save money in the long-term. If borrowers choose to take on loan with a longer repayment period, while their monthly payments and interest rate may be lower, they could end up paying more in total interest over time.
We’ve identified all of the states that offer refinancing programs in the U.S. in the map above. Below, we offer details on each state’s program, from what it takes to qualify to what rates they offer. Because some states are in the process of launching refinancing programs, we have included those as well.

Don’t see your state on the list?  Don’t give up just yet. Some states allow any borrower — regardless of their home state — to apply for refinancing.

(The information below is current as of Aug. 5, 2016.)

Iowa: Reset Loans

Iowa’s refinancing program, Reset Loans, is run by a non-profit called Iowa Student Loan. The organization is overseen by a board of directors appointed by the state’s governor.

This program is still technically in pilot mode until lawmakers in DC offer some more clarification on the full extent of allowable uses of tax-exempt bonds, but don’t let that stop you from applying. For a pilot program, it’s robust.

Eligibility: Anyone from any state in the U.S. can apply, but Iowa residents are eligible for slightly lower interest rates.

Repayment terms: They offer 5-, 10- and 15-year loan terms.

Interest rate: See a full list of rates here.

The lowest available rates for a credit score of 830 or higher are:

  • 5-year term: 4.24% (residents) and 4.49% (non-residents)
  • 10-year term: 5.30% (residents) and 5.55% (non-residents)
  • 15-year term: 5.69% (residents) and 5.94% (non-residents)

What you need in order to qualify: 

  • An annual income of at least $25,000.
  • A FICO score of at least 720.
  • No more than two accounts reporting 30-day delinquencies during the previous two years.
  • No delinquencies of 60 days or more during the previous two years.
  • No charge-offs, repossessions, collection accounts, judgments, foreclosures, garnishments by credit providers or tax liens.
  • No previous bankruptcies.

How it’s funded: The pilot program is currently funded through internal sources. Future program funding is expected to come from tax-exempt bond proceeds.

Where to learn moreReset Loans

Massachusetts: MEFA

Massachusetts Educational Finance Authority (MEFA) offers the MEFA Educational Refinancing Loan to all U.S. Residents.

Eligibility: All U.S. permanent residents, regardless of state.

Refinance terms: MEFA offers only 15-year repayment terms.

Interest rate: With excellent credit, rates can be as low as 4.95% fixed and variable interest rates as low as 3.28% APR. Fixed Rates 4.95% – 6.85% APR; Variable Rates 3.28% – 6.12% APR.

What you need in order to qualify: 

  • Minimum 670 FICO score.
  • At least $10,000 worth of loans you are seeking to refinance.
  • No past default history on your student loans (more than 270 days behind on payments)
  • No history of bankruptcy or foreclosure in the past 60 months.

How it’s funded: Taxable bonds.

Where to learn moreMEFA

Rhode Island: RISLA Refinance Loan

Eligibility: Borrowers may reside in any U.S. state.

Refinance terms: 5-, 10-, and 15-year loans. It should be noted that RISLA Refinance Loans do allow for twelve months of forbearance, but that this option pales in comparison to federal forbearance options that you will be giving up when you refinance federal student loans.

Interest rate: To get the best possible rates, you will need a cosigner. The lowest-possible rate for a 15-year term loan without a cosigner is 7.24%. That rate falls to 5.99% if you have a cosigner. You can also shave 0.25% off your rate if you agree to set up auto-pay. (See full rate details here)

What you need in order to qualify: 

  • If you and your cosigner reside at the same address, you must earn a combined income of at least $40,000 per year. If you live at different addresses, then either the borrower or the cosigner must make $40,000 individually.Where to learn moreRISLA

How it’s funded: Taxable bonds.

Kentucky: Advantage Education Loans

Eligibility: Only available to residents of Kentucky, Georgia, Mississippi, Missouri, Ohio, Virginia and West Virginia.

Refinance terms: 10, 15, 20, or 25 years.

Interest rate: They offer fixed rate loans. Rates range from 3.99% to 7.99%.

What you need in order to qualify: 

  • A minimum 670 FICO score for both the borrower and co-signer
  • To get the best rates, you’ll need a cosigner.
  • At least $7,500 in loans to refinance.

Extra perk: Kentucky’s refinance program will forgive your loan if you die or become disabled. Your cosigner will be relieved of his or her duty to pay as well.

How it’s funded: Excess agency assets, including governmental, fiduciary and proprietary funds. You can see a breakdown of the agency’s assets for 2015 here.

Where to learn more:  KHESLC

Alaska: Alaska Refi

Alaska Refi will offer a fixed interest rate of 5.20% on 5-, 10- and 15-year loans. *Update: Alaska’s program officially launched Aug. 1, 2016.

What you’ll need in order to qualify:

  • At least $7,500 in qualifying education loans in good standing
  • Have a FICO score of 720 or higher, or a cosigner who meets the FICO score requirement
  • Be employed or have other regular source of income
  • Open only to Alaska residents

The program is brand new and funding is on a first come, first served basis. You can sign up here.

How it will be funded: The Alaska Student Loan Corporation

South Carolina: PAL ReFi

South Carolina offers low-rate refinance offers through the Palmetto Assistance Loan (PAL) ReFi program.

Eligibility: You must be a South Carolina resident.

Refinance terms: 5-, 10, or 15-year terms.

Interest rates: South Carolina’s loan program is unique in that it offers just three different fixed rates for its loans. Those rates vary depending on which loan term you sign up for. For example, a five-year loan carries a 5% rate. A 10-year loan carries a 5.75% rate. A 15-year loan carries a 6.25% rate. You can take an additional 0.25% off that rate by enrolling in auto payments.

What you need in order to qualify:

  • A FICO score of 675 or higher.
  • You must be employed.
  • A debt-to-income ratio of 30% or less.
  • If you use a cosigner, he or she must be at least 24 years old.

Fine print: Borrowers with $20,000 or less in loans may only select a 5- or 10-year repayment term. Borrowers with more than $20,000 in loans may opt for the 15-year term.

How it’s funded: South Carolina Student Loan is a private non-profit that currently funds their PAL ReFi loans with their own assets. For now, that funding is more than sufficient. It is possible that they will look to bonds in the future, though.

Where to learn morePAL ReFi

Connecticut: Refinance CT

Eligibility: Must be a Connecticut resident or have attended an eligible Connecticut college or university. Those refinancing a CHELSA loan do not need to be a Connecticut resident.

Refinance terms: 5-, 10- or 15-year terms.

Interest rate: This program offers only fixed rates ranging from 4.25-7%. They  offer a 0.25% interest rate reduction for scheduling auto-payments.

Qualifications:

  • Monthly installment payments most be 43% or less of monthly gross income.
  • Maximum amount you can refinance: $100,000

How it’s funded: An initial $5 million was provided through the assets of a subsidiary organization in much the same way as Kentucky’s program currently receives funding. When the initial funds are exhausted, this program will be funded by a mix of taxable and tax-exempt bonds, depending on market conditions.

Where to learn moreCHESLA.org

Minnesota: SELF Refi

Eligibility: Minnesota residents only.

Refinance terms: 5, 10, and 15-year loans on sums of $10,000 or more.

Interest rate: Fixed rate loans vary from 4.5% to 6.95%. Variable rate loans vary from 3.2% and 4.55% (Beware: variable interest rates are capped at a whopping 18%).

Qualifications:

  • A 720 credit score or higher, though you may still qualify if you have a co-signer.
  • You need at least $10,000 in student loan debt to refinance.

How it’s funded: Funding comes from excess assets of the Minnesota Office of Higher Education. Some of those assets come from the interest paid on student loans, making at least a portion of the program self-funding. A full explanation of 2015 finances for the agency can be found here.

Where to learn moreSELF Refi 

North Dakota: Deal One Loan

Eligibility: North Dakota residents who lived at a physical address in the state for the past six months.

Qualifications: The borrower is required to have a minimum FICO score of 700 or a cosigner with a minimum FICO score of 650 is necessary. Other factors will also be considered.

Refinance terms:  Terms are based on how much you want to refinance.

Under $10,000: 10-year repayment term
$10,000 – $20,000: 15-year repayment term
$20,001-$30,000: $20-year repayment term
$30,0001 and up: 25-year repayment term.

Interest rate: Rates are determined by the term of your loan. The fixed rates APR is 4.33%. The variable interest rate APR is 2.15%, with a lifetime cap of 10%.

How it’s funded: The program is administered by Bank of North Dakota (BND), the only state-owned Bank in the country. All tax revenue is deposited at BND and is repurposed for a number of loan programs, including student loans.

Where to learn moreDeal One Loan 

Maine

Maine’s student loan refinance program is different from that of any other state. The Finance Authority of Maine backs loans issued by private lenders who offer student loan refinancing or consolidation. That way, consumers can pick from different local financial institutions competing against each other. The lenders are able to offer lower rates because of the insurance provided by the state agency.

Eligibility: Set by individual financial institutions, in collaboration with FAME.

Refinance terms: Set by individual financial institutions, in collaboration with FAME.

Interest rates: Set by individual financial institutions, with final approval from FAME. The entire point of this program is to keep rates competitive, so if you’re unhappy with the first rate you see, shop around.

Qualifications:

  • Minimum 680 FICO credit score for the borrower and cosigner (if applicable)
  • $24,000 minimum annual income for borrower or cosigner (if applicable). If there is a cosigner on the loan, the cosigner must have a minimum of two years of work history.
  • Minimum/maximum loan balance: $10,000/$240,000

How it’s funded: Maine runs this program similar to the way they run their commercial loan insurance program. In order for a loan to carry the insurance, guarantee fees must be paid. Financial institutions have the option to cover these fees themselves, or pass the cost on to consumers. Either way the fees get paid to the Finance Authority, and are then managed to build reserves in the event of a claim.

How to apply: Before taking out one of these loans, you will be required to take a ten-minute course on loan counseling online. A list of the current participating lenders includes: Infinity Federal Credit Union; Maine State Credit Union; Maine Savings Federal Credit Union; Seaboard Federal Credit Union; and University Credit Union.  Apply at any lender’s website or visit the www.theloanforme.com for the links to the lenders.

New Jersey: NJCLASS Consolidation Loan

New Jersey currently allows borrowers to consolidate their loans through the NJCLASS Consolidation Loan. An NJCLASS loan will allow you to refinance two or more loans by bundling them into a single loan and restructuring your repayment period and your interest rate. The rate for your new loan will be determined by taking the weighted average of the interest rates for each individual loan.

Eligibility: NJCLASS consolidation loans are offered to New Jersey residents attending an eligible in-state or out-of-state school and out-of-state students attending a school in New Jersey.

Qualifications:

  • Must consolidate a minimum of $30,000.
  • Must have 2 or more NJCLASS loans.
  • NJCLASS Loans must be current.
  • Borrowers must meet a minimum annual income requirement of $40,000.

Refinance terms:

  • 25-year term: Total loan balance of $30,000 to $60,000
  • 30-year term: Total loan balance of $60,000 or greater

Interest rate: The interest rate on a NJCLASS Consolidation loan will be determined by taking the weighted average of the interest rates for each individual loan minus 0.25%.

Other fees: There is a 1% administrative fee tacked on to all loans.

Coming Soon…

Some states are on the cusp of providing student loan refinancing options. These states may have passed the necessary legislation, but are still working on getting their programs ready to open to applicants. That means we aren’t able to link to any specific websites for more information. But we’ve shared what we know so far:

The NJCLASS Refi+ Loan

In the Fall of 2016, New Jersey will launch the NJCLASS Refi+ loan. This program will allow borrowers to refinance even individual loans, removing the requirement for consolidation.

Eligibility: NJCLASS Refi+ will require applicants to either be state residents at the time of application, or to have been state residents when they originated the loan they are attempting to refinance.

Qualifications:

  • Must earn an annual income of $40,000
  • Must have a minimum FICO score of 670
  • Debt-to-income ratio must be less than 40%.

Interest rates: The NJCLASS Refi+ will determine your loan rate based on your credit score.

  • Scores of 780+ will merit an interest rate of 4.90%.
  • Scores of 720-779 will merit an interest rate of 5.70%.
  • Scores of 670-719 will merit an interest rate of 6.90%.
  • Those with scores below 670 may qualify with a parental cosigner.

How it’s funded: NJCLASS Refi+ will be funded through tax-exempt bonds.

Where to learn moreHessa.org

Maryland (Montgomery County)

Montgomery County, Md. will establish the Montgomery County Student Loan Refinancing Authority by April 2017. Unfortunately, only residents of Montgomery County can apply.

Virginia

Virginia lawmakers have proposed a student loan refinance program, but have yet to vote on the bill. To follow along as it moves through the state legislature bookmark the bill’s page.

Wisconsin

Wisconsin’s SB 194, which would have established a State Loan Refinancing Authority to provide a means for borrowers to refinance student loans at lower rates. It was voted down in April 2016.

Nevada

Nevada’s SB 215 also would have allowed for state refinancing of student loans. It was heard, but no action was taken.

Missouri

Missouri’s HB 2432 has reached the house floor but has not yet been voted on. It isn’t looking good.

California

California actually did pass legislation that would have opened the door for a student loan refinancing program. However, the program never received funding from the state, rendering it useless.

TAGS: ,

College Students and Recent Grads, Pay Down My Debt, Student Loan ReFi

Obama Administration Reaches out to Americans with Disabilities and Student Loans

Advertiser Disclosure

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

mortar board cash

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.

TAGS: , , ,

College Students and Recent Grads, Student Loan ReFi

My Student Loans Are Keeping Me from Buying a House

Advertiser Disclosure

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

Student Loans

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.”

TAGS: ,

College Students and Recent Grads, Student Loan ReFi

5 Options for Enlisting in the Military to Pay for College

Advertiser Disclosure

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

Student Loan Mod_lg

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.”

TAGS: , ,

College Students and Recent Grads, Pay Down My Debt, Student Loan ReFi

Should I Drain My Emergency Fund to Pay Off Student Loans?

Advertiser Disclosure

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

Depressed man slumped on the desk with his hands holding credit card and currency

When Michelle Schroeder-Gardner graduated with an MBA in finance in 2012, she had $40,000 in student loan debt. But by the middle of 2013, she was happily debt-free. “To pay it off in that time frame, I side hustled like crazy,” says Schroeder-Gardner, 26, who writes at MakingSenseofCents.com. “I was a freelance writer, mystery shopper, eBay seller, survey taker and more. I was working 100-hour weeks between my day job and my side jobs.”

In her final push to pay off her loans, Schroeder-Gardner and her husband used about $10,000 from their emergency fund—almost all of it—to pay off the balance. “It made us a little nervous, but we knew that we would still be fine due to our low budget and high income,” she says. “I didn’t want my student loans hanging over my head for years to come.”

Although it’s admirable—amazing, even—that Schroeder-Gardner eliminated $40,000 in student loan debt in less than a year, experts might disagree with her technique. Draining your emergency fund under circumstances that aren’t an emergency isn’t something they typically recommend.

When should you do this?

“Some of it has to do with life stage,” says Wes Brown, a financial planner in Knoxville, TN. “If you’re living at home in your parents’ basement, and other liabilities are at a minimum, and there’s a safety net, then I could see supporting this.”

In other words, if you’re not saddled with a variety of fixed expenses that would be at risk if you lost your job or needed to replace your roof, you’re a better candidate for wiping out your emergency fund to pay down debt.

You also may be in the clear if you have access to other kinds of liquidity, such as a home equity line of credit, or the Bank of Mom and Dad. “It could be that you have family members or friends who are willing to lend to you, or that you have good silver you could pawn or sell,” says Larry Luxenberg, a financial planner in New City, NY. “But whatever it is, you may need money in an emergency, so you need to be prepared for all sorts of contingencies.”

James Bryan, a financial planner in Edina, MN, agrees. “This isn’t a bad route in certain situations,” he says. “For example, if you’re 26, you live in an apartment, you have a pretty steady job and you don’t have a big car payment. But you have to make darn sure that you have excellent job security and you’re healthy and not at risk of any disability.”

When shouldn’t you do this?

“If you don’t have any liquidity resources, I would say that’s a bad idea,” Luxenberg says. “A lot of things in your personal finances require patience and balancing things. Too much debt can be a bad thing, but a reasonable amount of debt for the right purposes can be a good thing.”

That’s because of all the debt you could have, student loan debt is one of the more favorable types. It’s typically lower cost than consumer debt, you get a tax break on the interest paid, and there’s often flexibility in payment plans if you fall on hard times. “The worst case scenario is where you use up your emergency fund to pay off student loan debt, and then you find yourself in a bind,” Brown says. “So you have to borrow from another line of credit to cover that, and you’re swapping a more favorable kind of debt for a less favorable kind.”

It’s also not a great plan to wipe out your emergency reserve if you’re carrying a mortgage. You could be one mortgage payment away from owning your home outright, but if you miss it because you lose your job and have no back-up cash, you could still be foreclosed on. And of course, there’s always unexpected maintenance. “A home is a massive responsibility,” Bryan says. “A roof, a new furnace, they cost a lot of money and they don’t give you a 12-month warning.”

What’s the best approach?

For most it will be keep that emergency reserve and address your debt the old-fashioned way—by paying it down paycheck by paycheck. If you have no emergency reserve, consider splitting your discretionary funds between savings and debt every time you get paid. That way you can achieve two goals at once. “You could use a simple equation like 70% toward debt and 30% toward savings,” says Nev Persaud, a financial planner in Atlanta. “You have to be wise in creating a balance.”

TAGS: ,