Advertiser Disclosure

College Students and Recent Grads, Life Events

The College Graduate’s Financial Checklist

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Students throwing graduation hats

A recent MagnifyMoney.com national survey of over 1,000 millennials who graduated college between 2011 and 2014 revealed their biggest financial regrets:

  • Not saving enough: 31%
  • Not learning personal finance in school: 26%
  • Not being more careful about loans and debt: 23%
  • Not establishing credit sooner: 19%
  • Getting hit with fees: 12%
  • Missing payments: 10%
  • Other: 5%

[Find full survey results here]

We’ve used the top four regrets to create a financial checklist tailored to current college graduates. Hopefully, the mistakes of your older peers can help provide a guide towards financial health starting right now!

MagnifyMoney’s Financial Checklist for College Graduates

We encourage you to keep this calculation and goal in mind when making your early money choices right out of school:

Calculation: [How much are you making per month] – [student loan payment] = what you have to spend on other expenses (ie: rent, car, saving for retirement)

Goal: Keep your fixed expenses (student loan payment, rent, cost of transportation) under 50% of your monthly take home pay

1. Not Saving Enough

  • Establish a savings account (preferably one with at least 1.00% APY)
  • Automate a portion of each paycheck to go right into savings
  • Do you have an employer matched retirement account [401(k) or 403(b)]?
    • Contribute at least enough each paycheck to get the match
    • If you can afford more, go up to 15%
  • No employer sponsored retirement account or self-employed?
    • Contribute to an IRA or SEP-IRA for self-employed (either traditional or Roth) each year

2. Not Handling Student Loans Carefully

Step 1: Find and list all loans (Federal and Private) which lenders own them

  • Tip: Use NSLDS to keep track of Federal loans. A credit report can be a good starting place to track private lenders.

Step 2: Determine how much are your monthly payments?

Step 3: When will your first payment be due

Step 4: If you have a Federal loan see if you are eligible for loan forgiveness and/or income-based repayment programs

  • Sign up for programs based on your eligibility

Step 5: Look into refinance options if you’re willing to give up the federal protections (forgiveness and income-based repayment plans) or Federal loan consolidation options (tip: be sure to check if you’d still be giving up protections)

Step 6: Automate payments on loans once grace period ends

Goal: Use student loan monthly payment to determine how much you can afford to pay on the rest of your monthly expenses (ie: rent and car payment).

3. Not Learning About Personal Finance in School

Understand these basics

  • Set financial goals
  • A strong credit score will help keep the rest of your financial life less expensive
  • Budgeting is an important tool. Understand the inflow and outflow of your cash and only spend what you can afford
  • Compound interest will be your best friend or worst enemy.
  • Don’t be afraid to invest, but avoid being emotional and yanking money out when the market takes a downturn
  • Credit card debt is never financially healthy nor necessary
  • Develop the saving habit early and practice it monthly

Read these books and websites:

Listen to these podcasts:

Not all these styles of delivering money knowledge will appeal to you. The trick is to find one that stimulates your desire to learn more about finance, take control of debt and feel empowered by money. 

4. Not Establishing Credit

Step 1: Get a credit card
Step 2: Make monthly purchases of no more than 20% of your total available credit limit
Step 3: Pay off your card on time and in full each month

Can’t get a regular credit card?

  • Get a secured card, which will require you put down a deposit (between $50 – $200 depending on the card).
  • Repeat the same steps as with a regular credit card and you’ll build your score to 680+ and be eligible for an unsecured credit card.

[Search for a secured card here]

Deal with any negative information

  • Bring any outstanding accounts current
  • Deal with items in collections [Go here for more information]
  • Continue pumping positive information on to your credit report by using your credit card responsibly

Understanding your credit report

  • A credit score is based off information on your credit report, so it’s important to ensure your report is accurate
  • Once a year, you can download your credit report from each of the 3 credit bureaus (Experian, Equifax, TransUnion) by going to annualcreditreport.com
  • You can track your credit score for free by using on of these sites or credit cards

Don’t Be Afraid to Ask for Help

Money may still be a taboo topic for many, but the only way to get reliable help is to just ask! Don’t let fear or shame keep you in debt. You can always reach out to us by emailing info@magnifymoney.com.

Find our simple, visual checklist here.

Graduate-Checklist-updated

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

TAGS: , ,

Advertiser Disclosure

College Students and Recent Grads

Sallie Mae Loan Consolidation Is Over, But Here Are Some Options

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Yasuo Namba via iStock

Sallie Mae has a long history in the student loan world. Since the 1970s, this student loan giant has provided or serviced loans for college and graduate school students, as well as their parents.

Although Sallie Mae used to be government-sponsored, it’s now a private company that lends private student loans to cover education costs. And while it once offered consolidation options, you can no longer consolidate student loans through Sallie Mae.

So if you were looking for Sallie Mae loan consolidation, the bad news is that it no longer exists. But the good news is you have two other options for combining multiple loans into one.

2 alternatives to Sallie Mae student loan consolidation

While Sallie Mae loan consolidation is a thing of the past, you still have two options for consolidating debt: borrowing a direct consolidation loan from the federal government, or refinancing with a private lender. Here’s what you need to know about each.

1. Consolidate your federal student loans with a direct consolidation loan

If you’ve got federal student loans, then you can apply at StudentLoans.gov to combine them into a single direct consolidation loan.

The main benefits to federal student loan consolidation include:

  • Combining multiple loans into one: A consolidation loan can replace several loans with one new one, thereby simplifying repayment.
  • Choosing new repayment terms: You could stick with the standard 10-year term or put your loans on another plan, such as income-driven repayment or extended repayment.
  • Adjusting your monthly bills: If you’re struggling to pay bills each month, putting your consolidation loan on an income-driven or other plan could lower them. Plus, income-driven plans can end in loan forgiveness after 20 or 25 years of repayment.
  • Making certain loans eligible for income-driven repayment: Parent PLUS Loans, for example, don’t qualify for income-driven repayment unless you consolidate them first. After you do, you could put them on the income-contingent repayment plan.
  • Getting your loans out of default: Along with loan rehabilitation, consolidation is one way to get your loans out of default and back into good standing.
  • Switching to a new loan servicer: If you’ve had a bad experience with your loan servicer, you could change to a new one. Some federal loan servicers include Nelnet, Navient, and Great Lakes.

Although consolidating helps you simplify repayment and lets you choose a new repayment plan, it won’t save you money on interest. In fact, if you choose a longer term than what you have now, you’ll likely pay more interest over the life of your loan.

It’s important to note that consolidation doesn’t lower your interest rate, but rather takes the weighted average of your previous rates and rounds up to the nearest one-eighth of a percent. So, if you’re looking to save on interest, student loan refinancing could be a better option.

2. Combine federal and/or private loans through student loan refinancing

Your second option for combining several pieces of debt into one is via student loan refinancing. Unlike federal consolidation, you refinance with a private lender, such as a bank or credit union.

You can combine both federal and private student loans through refinancing. Note, however, that if you refinance federal loans, you lose access to federal programs, such as income-driven repayment and federal loan forgiveness.

Refinancing has its own benefits, however, with one of the biggest being the potential to save money by lowering your interest rate. Here are some major reasons to refinance:

  • Qualifying for a lower interest rate: If you meet a lender’s requirements for credit and income — or can apply with a cosigner who does — you could qualify for a lower rate on your refinanced student loans.
  • Choosing between a fixed and variable rate: Most lenders let you choose between a fixed rate, which never changes, and a variable rate, which is sometimes lower to begin with but can fluctuate over the life of the loan.
  • Saving money on your student loans: With a lower interest rate, you could save hundreds or even thousands of dollars.
  • Choosing new repayment terms: Private lenders often offer repayment terms between five and 20 years.
  • Adjusting your monthly payments: If you can afford higher payments, you could choose a shorter term than you have now and get out of debt more quickly. But if you’re feeling strangled by student loan bills, you might choose a longer term to reduce your monthly payments and create more breathing room in your budget.

If you’re interested in refinancing student loans, it’s easy to get a rate quote from a few lenders. By checking prequalification offers, you can see if you could snag a lower interest rate on your student debt.

Combining your loans can help simplify repayment

The average student loan borrower holds 3.7 loans, according to a 2017 report by Experian. With so many loans and loan servicers, you could have trouble keeping track of your monthly bills.

But if you consolidate your loans, you’ll only have to make one payment per month to a single loan servicer — plus, you might get the added benefit of selecting different repayment terms or even lowering your interest rate.

Even though you can’t consolidate student loans with Sallie Mae anymore, you still have the option of consolidating with the federal government or refinancing with another private lender. Before making any changes to your debt, though, make sure you understand the differences between federal consolidation and private refinancing.

Once you’ve thought through the pros and cons of each, you can choose an approach that will bring you one step closer to a debt-free life.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

TAGS: , , ,

Advertiser Disclosure

College Students and Recent Grads

5 Times Refinancing Your Student Loans Is a Bad Idea

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Domoyega via iStock

Is refinancing student loans a good idea?

In many cases, the answer to this question is yes. Refinancing may bring down your interest rates if you qualify, saving you money on your student loans. Plus, it gives you the chance to choose new repayment terms and adjust your monthly payments.

But there could also be downsides to refinancing student loans, so it’s crucial to weigh the pros and cons before you make any changes to your debt.

If any of the following five scenarios apply to you, you might be better off avoiding refinancing and going with a different repayment strategy for your student debt.

1. You’re relying on federal repayment plans or forgiveness programs

If you refinance government-provided federal student loans with a bank or credit union, you turn them into a private student loan. Since you won’t have federal loans anymore, you’ll no longer have access to federal repayment plans or forgiveness programs.

The government offers a variety of repayment plans to help you adjust your monthly payments, such as income-driven repayment,extended repayment, and graduated repayment. Private lenders, on the other hand, typically don’t let you change your payments once you’ve selected terms. If you want to keep the option of income-driven repayment or another federal repayment plan open, refinancing might not be the right move for you.

You could also lose eligibility for federal forgiveness programs, such as Public Service Loan Forgiveness or Federal Teacher Loan Forgiveness. These programs only forgive federal loans, not private ones, so you should likely avoid taking your debt private through refinancing if you’re working toward federal loan forgiveness of any kind.

2. You don’t have a stable source of income

Before approving you for student loan refinancing, lenders look to see if you have strong credit and a stable income. Not only does this reassure them that you have the means to repay a loan, but it also helps you avoid taking on private debt you won’t be able to pay back.

Without a stable income, you run the risk of missing payments and going into default. And as described above, private lenders don’t have as many flexible repayment options as the federal government does if you’re struggling to pay.

Private lenders typically don’t offer income-driven plans, and as mentioned, few will let you adjust your bills once you’ve selected a term (unless you refinance for a second time). Some will let you postpone payments through forbearance if you run into financial hardship or go back to school, but this varies by lender and is just a temporary solution.

So if you’re worried about your ability to pay back your college debt, you might want to wait until your income is more stable before refinancing your student loans.

3. Your interest rates are already low

One of the biggest perks of refinancing student loans is getting a lower interest rate on your debt. Reducing your rate could save you money over the life of your loans.

Let’s say you owe $25,000 at a 6.8% annual interest rate. Over 10 years, you’d pay $9,524 in interest. But if you could bring that rate down to 4.5% through refinancing, you’d pay just $6,092 in interest over 10 years — and if you could pay back the debt faster, you’d save even more on interest.

But this perk only applies if you’re able to lower your rate through refinancing. If your rates are already low, you might not derive much benefit from refinancing.

Fortunately, it’s easy to get an instant rate quote from many refinancing providers online. You’ll enter a few basic pieces of information — e.g. loan amount, school, income — and the lender will show you prequalification offers.

By shopping around a little, you can see if refinancing would bring down your interest rate and save you money on your student loans.

4. Your cosigner isn’t happy about sharing debt

If you can’t meet a lender’s requirements for credit and income, you could apply with a cosigner who does. Even if you can qualify on your own, adding a cosigner to your debt could help you get the lowest rates.

But sharing debt is a big responsibility, and your cosigner will be on the hook for your student loan in the event you can’t pay. What’s more, the debt will show up on your cosigner’s credit report and could affect their debt-to-income ratio.

This could make it harder for your cosigner to take out a loan if they need one in the future, so enlisting a cosigner shouldn’t be taken lightly. You should even be careful about talking a parent into sharing your debt if they’re reluctant to do so.

If any financial issues arise in the future, this cosigned debt could put a strain on your relationship that’s simply not worth the lower interest rates you might get from refinancing.

5. You don’t have much time left on your student loans

When you refinance student loans, you have the chance to choose new repayment terms. Most lenders offer terms between five and 20 years. Unless you’re specifically trying to lower your monthly payments, you need to be careful not to accidentally extend the life of your loans.

If you’ve only got a few years left on your debt, choosing a term of five years or more could leave you owing money (and making repayments) for longer than you need to. That being said, you can typically prepay your loan without penalty — but at the same time, you might not feel as motivated to pay more than you’re required to each month.

So if you’re on track to get out of debt in a short period of time, be careful you don’t refinance for an even longer repayment term.

Is it bad to refinance student loans?

So is refinancing student loans a good idea or a bad idea? In many cases, refinancing is a savvy move, but there are some scenarios when the cons could outweigh the pros.

If you’re relying on federal repayment plans or forgiveness programs, for instance, turning your debt private wouldn’t be a good move. And if you’re concerned you won’t be able to afford monthly payments, you might also wait to refinance until your finances are more secure.

But if none of these concerns are an issue, refinancing could be a smart strategy to lower your interest rate, adjust your monthly payments and choose new terms. It also lets you switch to a new loan servicer, which could have better customer service than the one to which you’re currently assigned.

When it comes to managing student loan debt, avoid making rash decisions that could cost you. Make sure you’ve educated yourself on the advantages and disadvantages of student loan refinancing, so you can feel confident you’re making the best decision for you and your finances.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

TAGS: , ,

Advertiser Disclosure

College Students and Recent Grads

This is Why You Were Rejected for Student Loan Refinancing

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

iStock

After being rejected for student loan refinancing, you might think it’s out of your reach.

The good news is that once you diagnose why you fell short, you can improve your application and try again.

Consider these three common reasons to get rejected for student loan refinancing, plus how you can work toward acceptance.

1. Your credit report revealed a red flag

When you attempted to prequalify and then formally apply for student loan refinancing, your potential lender likely performed both “soft” and “hard” credit checks. Their underwriting team was looking for red flags, such as a subpar credit score, a history of missed debt payments or any major financial events, such as a bankruptcy.

Lenders peel back these layers to verify your reliability when it comes to repaying debt. It’s possible you were rejected out of hand because you fell short of one these basic requirements common to many lenders.

For example, many top-rated student loan refinancing companies require you to sport a credit score in the high 600s. If you applied with a lower score, you disqualified yourself immediately.

Other times, a historical note on your credit report could have killed your refinancing application. For instance, some lenders require that you be at least five years removed from bankruptcy before applying to refinance.

What to do about it

The quick fix here would be to seek out lenders who have more lenient requirements. Perhaps you could qualify with Earnest (minimum credit score of 650) if you fall short at a competing lender like EDvestinU (700).

Be sure to avoid slick lenders, however, that offer quick acceptance in exchange for gotcha-style fees, interest rates or repayment terms.

Now, say your score isn’t even in the 600s. You could accelerate your path to acceptance by bringing on a cosigner. A creditworthy parent, for example, could lift your application above the threshold. Just keep in mind that some lenders would still require you, as the primary borrower, to hit a credit score minimum, albeit a lower one.

The slower but more rewarding path to a stronger refinancing application is to work on improving your credit score.

Before all else, consider the factors affecting your credit. Your score could climb, for example, if you make on-time debt payments and lower your overall debt. Taking out a credit builder loan and repaying it in a timely fashion is one way to speed up the process.

Track your progress using a free service like My LendingTree. (Note: LendingTree is the parent company of MagnifyMoney.) You can also review your full credit report for free annually via AnnualCreditReport.com.

2. Your debt-to-income ratio is out of whack

Lenders understand that you’re going to have debt. Otherwise, you wouldn’t be knocking on their door. However, their underwriting teams want to confirm that you have the paycheck to keep up with your loan repayment, plus your other potential outstanding debt.

They consider three related factors during the underwriting process:

  • Income: What’s your annual gross income?
  • Employment history: Where does your income come from, and have you held jobs for consistent periods?
  • Debt-to-income ratio (DTI): Does your debt dwarf your income, or do you have the salary to repay your creditors?

Your refinancing application could have stalled for any of these reasons. Perhaps your credit card debt and entry-level salary are harming your DTI, for example.

Lenders typically seek applicants with DTIs below 40%. You can calculate your DTI using the following equation:

Monthly debt payments / Monthly pretax income = DTI

It’s also possible that you don’t earn enough income to qualify. Top-rated lenders like Splash Financial ($42,000), Education Loan Finance ($35,000) and LendKey ($24,000) each set different benchmarks for prospective borrowers.

What to do about it

Shopping around for a good lender is the easiest solution. There are more and more lenders that don’t have income and employment requirements, so you could improve your application by simply applying elsewhere.

Earnest is an example of a lender that prides itself on a more flexible approach to underwriting. The company rewards applicants who are good savers, and who have strong educational backgrounds and earning potential.

Another solution to this problem would be piggybacking on a higher-earning cosigner who won’t mind footing the bill for your loan if you’re unable to repay it yourself.

But the most challenging — and probably most beneficial — solution is increasing your income, decreasing your debt or ideally, both. That’ll help improve your DTI.

If you can’t lower your debt by trimming your household budget, you might pause your refinancing applications to focus on increasing your income. You could take on a side hustle, negotiate a raise at work or use the next major holiday to ask family and friends for their financial support — whatever works best for you.

3. You’ve missed payments on your loans

The largest determining factor of your credit score is payment history. It comprises 35% of the commonly used FICO score. Plus, a missed — or delinquent — payment could stay on your credit report for as long as seven years.

Aside from the effect delinquency might have on your credit, it could stall your application. After all, lenders want to avoid applicants who don’t have a strong history of repaying their debt promptly.

If your delinquency has turned into a default, refinancing might be out of the question. Most top-rated lenders, including Earnest, require that all your loans be in good standing at the time of your application.

What to do about it

You might have seen refinancing as the way to get up to speed on your loan repayment. Unfortunately, you have some dirty work to do first.

For federal loans in default, you can take one of two paths:

  • Loan rehabilitation: Phone your servicer and agree to make nine on-time payments over the next 10 months to get your loan up to date. In exchange, your loan will no longer be considered in default.
  • Loan consolidation: Using a direct consolidation loan, group your loans into one. You won’t be able to lower your interest rate, but you will be able to reduce your monthly payments via an income-driven repayment plan — and most importantly, shed the “default” status.

For delinquent or defaulted private loans, the road ahead could be more difficult. Open the lines of communication with your lender to review your options.

You might be surprised at how understanding some lenders can be. You might get an offer, say, for a modified repayment plan or a temporary forbearance to allow you to catch your breath before continuing repayment.

Once your loan repayments are back on schedule, you’ll be much less like to get rejected for student loan refinancing.

Don’t give up on refinancing after a rejection

There’s only one way to lower your student loan interest rates while starting fresh with a lender of your choice. Refinancing gives you that ability, and that’s why it’s not always easy to qualify for it.

When jumping through hoops to improve your credit, DTI or loan statuses, don’t lose sight of your goal to overcome getting rejected for student loan refinancing. No matter how your application fell short initially, you can turn rejection into approval by taking some serious steps in the right direction.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

TAGS: , ,

Advertiser Disclosure

College Students and Recent Grads

What Happens to Student Loans When You Drop Out of College?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

iStock

About 40% of college students who borrowed money for their education considered quitting school, according to a MagnifyMoney survey.

If you’ve also thought of leaving — or have already stepped off campus — you might be wondering: What happens to student loans when you drop out of college?

Here’s what you need to know to ensure you get rid of your debt, even if you don’t graduate.

What happens to student loans when you drop out?

Unfortunately, the student loans won’t just disappear. The main exception is if you leave school and cancel your federal debt within 120 days of the loan’s disbursement. In that case, your school would return the balance to your servicer, and you’d be off the hook for repayment, fees and interest.

Similarly, with private loans, you could return some or all of the balance as soon as you decide to leave school. If you borrowed from Sallie Mae, for example, you could forward your school’s tuition refund check back to the lender to ease your repayment.

Be aware, though, that your lender might have already imposed interest, leaving you with a larger amount to repay than what you borrowed.

It’s also possible that your school already cashed the funds from your loan, making the refund process more difficult. Check with your campus financial aid office as soon as you plan to withdraw to learn about its tuition refund deadlines.

If you’re departing school with federal or private student loans to repay, rest assured that your grace period is likely protected. Certainly with federal loans, as well as with some private lenders, your servicers won’t send your first bill until after the six-month grace period has ended. But note that the clock starts ticking as soon you officially tell your school registrar that you’re withdrawing.

When the six months are up, your servicer will provide:

  • A repayment schedule, including the first payment due date
  • The number and frequency of payments
  • The amount of each payment

By checking with your financial aid office, you’ll learn about the exit counseling requirement for your federal loans. The program teaches you about how to handle your loan repayment once you’re off campus. You’ll also learn about your ability to change repayment plans, for example.

Opening up dialogues with your school’s financial aid office and loan servicer are the critical first steps if you feel lost. You’re best served, however, by doing your research. Federal loan servicers, for example, might not have the time or resources to walk you through all your loan repayment options.

There’s no such thing as exit counseling for private loans, so it’s wise to take your loan repayment by the reins and contact your lender as soon as possible.

5 key tips if you drop out with student loan debt

Without a diploma — and perhaps no strong job prospects — your student loan debt could feel like an impossible challenge. It doesn’t have to be.

Consider these five tips for handling your loan repayment.

1. Use your grace period wisely

If you recently left school, you might be tempted to put your loan repayment on the back burner until you receive your first bill in the mail. But by getting a head start, you could ease your eventual repayment.

Use your six-month period to contact your federal loan servicer via the National Student Loan Data System, as well as sync up with your private lender if you have one. Start a conversation about where you stand with your debt.

If you use this time to educate yourself on the ins and outs of loan repayment, you won’t be as stressed when your first due date approaches.

Keep in mind that for federal and private loans, you may only receive one grace period. In the case of federal loans, if you return to school more than six months after leaving, you won’t have another six-month grace period on which to fall back.

2. Adjust your repayment plan, if necessary

With your private student loans, you’re likely stuck with the repayment plan to which you agreed.

But federal loans come with the ability to alter your repayment plan.

Without a degree and, perhaps, lacking a sizable paycheck, you might benefit from one of the government’s income-driven repayment plans. You could lower your monthly payments to a percentage of your income until you can pay more.

Remember that whenever you lower your monthly payment, you’re also lengthening your repayment and making it more expensive.

Say you have $15,000 in federal loans on a standard 10-year repayment plan and are repaying the balance, plus 5.70% in interest. By switching to a 20-year income-based repayment plan, for example, your monthly payment could fall from $164 to $58. The bad news is that in this scenario, you’d owe $5,518 more in interest over the life of your loan.

You might still want to focus on lower monthly payments over long-term savings, but use Federal Student Aid’s Repayment Estimator to ensure you choose the right repayment plan for your situation.

3. Explore your deferment and forbearance options

While you were enrolled, your federal and private student loans were effectively deferred — that is, you were excused from making payments as long as you kept going to class.

Now that you’re off campus (or considering leaving), it’s worth investigating ways to pause your loan repayment.

For federal loans, there are many ways to defer payments, including if you:

  • Take part in a rehabilitation training program
  • Are unemployed and unable to find work
  • Experience an economic hardship
  • Serve in the military
  • Return to school

Private lenders might offer the more limited option of forbearance, rather than deferment. With this, you could be able to pause your repayment for months due to a job loss or other financial struggle. Be prepared to provide evidence that your hardship has made it difficult to keep pace with loan payments.

4. Increase (and keep more of) your income

Maybe you’ve already given yourself some breathing room by switching to an income-driven repayment plan or securing a deferment or forbearance for your loans.

To give yourself an even better chance to get out from under your debt, come up with ways to increase your income — and keep more of it.

Perhaps your job options are limited without a degree in hand. You could still leverage the skills you picked up in college, however, to start making some money. If you’re a former journalism student, for example, you might try to be a freelance writer. And you could always supplement this with a side gig, too.

As soon as you’ve developed at least one income stream, make sure it’s not going to waste. Start by budgeting your expenses, line by line. This way, you might find some trimmable costs or room to make extra-large student loan payments.

5. Consider refinancing your student loans

Keeping up with on-time loan payments and increasing your income will make you a more attractive candidate for student loan refinancing.

Through refinancing your college debt, you could lower your interest rate, potentially saving significantly in interest payments. You could also choose a friendlier lender and consolidate your loans into one account if you’re looking to simplify your repayment.

Refinancing without a bachelor’s degree is possible, though not with every lender. Some will insist on you being a graduate, but others just want to know you’re a creditworthy borrower.

At Citizens Bank, for example, you’re eligible to refinance without a degree. But you must make 12 on-time payments toward your loans before applying.

Before you decide to refinance, however, be certain that you won’t miss any features of your federal loans. Only federal student debt comes with access to income-driven repayment and some types of deferment, not to mention loan forgiveness.

Whatever your decision, you can learn more through our complete guide to student loan repayment.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

TAGS: , , , ,

Advertiser Disclosure

College Students and Recent Grads

How to Refinance Your Student Loans in 6 Easy Steps

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

iStock

When it comes to paying back student loans, keeping up with interest can be half the battle. Luckily, refinancing offers a chance to bring down your interest rate.

If you qualify, you could restructure your debt with a reduced rate and new repayment terms. Plus, you could simplify repayment by combining multiple loans into one.

Even if you’re not sure if refinancing is right for you, it’s easy to check your offers with a few providers and still make no commitment whatsoever. Read on to learn how to refinance a student loan in six steps.

How to refinance student loans in 6 easy steps

Although refinancing can come with a number of financial benefits, not everyone qualifies. That’s why your first step in the process is learning about the criteria and seeing how your finances measure up.

1. Learn how to qualify for student loan refinancing

Student loan refinancing is offered by private lenders, including banks, credit unions and online lenders. Unlike the federal government — which may have lent your original student loans — private lenders require that you pass a credit check in order to qualify for a loan. Basically, they want to ensure you have a history of repaying your debts, as well as a stable income moving forward.

Before approving you for student loan refinancing, lenders look at a few key metrics:

  • Credit score: Most lenders prefer a score around 650 or higher.
  • Income: Although there’s no specific cut-off, banks want to see you have a steady source of income or at least an offer of employment.
  • Debt-to-income ratio: Some lenders take other debts into account to ensure you have enough cash flow each month to cover your bills.
  • College degree: Most online lenders only work with borrowers who have graduated college. If you left school before graduating, however, there are still a few refinancing providers who will work with you.

Before starting the refinancing process, take a look at your credit score, income and other financial credentials. If your credit score is low, you might take steps to build it up before applying for refinancing.

Alternatively, you could apply with a creditworthy cosigner to boost your chances. Just make sure you and your cosigner have set clear expectations around who is responsible for paying back the debt.

2. Check your rates with more than one lender

Once you have an idea of whether you’re eligible for refinancing student loans, your next step is to check your rates with multiple lenders. Many lenders make it easy to check your rates online with an instant rate quote.

All you have to do is enter a few basic pieces of information, and the lender will tell you if you prequalify for student loan refinancing. Although these offers aren’t final, they give you a good sense of whether you qualify and what your rate could be.

Lenders such as SoFi, CommonBond, Earnest, Laurel Road, and LendKey offer this instant rate quote. Simply head to the lender’s website and provide a few basic details about yourself. Most lenders ask for the following:

  • Name
  • Address
  • Degree and university
  • Total student loan debt
  • Income
  • Monthly housing payment

After filling out the form, you’ll consent to a “soft” credit check. Unlike a “hard” credit inquiry, this soft check won’t impact your credit score at all.

After a couple of seconds, the lender will show you various prequalification offers. By checking your rates with multiple lenders, you can find an offer that best matches your debt payoff goals.

3. Compare offers and loan terms with a refinancing calculator

Once you have a few offers on the table, you might simply choose the one with the lowest rate. But finding the best offer isn’t always so simple.

For one, you’ll often have the choice between a fixed and variable rate. A fixed rate will stay the same over the life of your loan, while a variable rate could fluctuate over the years.

While the St. Louis Federal Reserve predicts rates will rise over the next two years, you might find variable rate offers that are currently lower than those with fixed rates. You’ll want to consider how long you think you’ll need to repay your debt as you decide between a fixed and variable loan.

Your rate could also vary depending on your repayment term. Most lenders offer terms of five, seven, 10, 15, or 20 years.

A shorter term will typically come with a higher monthly payment, but it will get you of debt faster. A longer term means lower monthly bills, but could also mean you’ll pay more interest over the long run.

Comparing all these variables can get confusing fast, so use our student loan refinancing calculator to do the heavy lifting for you. Play around with a few different rates and terms to estimate your monthly payments and total interest cost.

And consider your financial goals, whether you’re driven to repay your debt as quickly as possible or are looking for some relief from heavy monthly payments. If you’re struggling to pay your bills, for instance, a longer term with lower monthly payments could be what you need to get back on your feet.

Besides crunching the numbers, don’t forget about other benefits a lender might offer. CommonBond, for instance, lets you postpone payments if you run into financial hardship. Meanwhile, SoFi offers career coaching and networking events for its customers.

Although a low interest rate is probably your priority, consider these extra benefits, especially if some or all of your debt is comprised of federal student loans. Once you refinance federal loans, they become private, and you’ll lose access to certain federal programs, such as income-driven repayment plans and student loan forgiveness.

If you’re interested in any of these federal student loan programs, then you might not want to refinance your loans with any lender, and should look into consolidation instead.

4. Enlist a cosigner if needed

If you don’t meet a lender’s underwriting requirements for credit and income on your own, you might need to add a cosigner to your application. Even if you’re eligible on your own, adding a creditworthy cosigner could help you qualify for the most competitive rates.

But cosigning on debt is a big responsibility, and your cosigner’s credit will be on the line in the event you can’t pay. Before asking someone to share your student loan debt, make sure you both discuss what it means and how you’ll deal with potential financial setbacks in the future.

You might also check to see if your lender offers cosigner release after a certain period of on-time repayment. With this benefit, your cosigner could help you qualify for refinancing but then would eventually be removed from your debt completely.

5. Gather your documents and submit a full application

If you find an offer you like, your next step is to submit a full application. Similar to the instant rate quote, this application will collect your personal information.

But it will go more in-depth and will ask you to upload documents with your loan and income information. Here are some the materials you’ll likely need to provide:

  • Official statements for all the federal and private loans you wish to refinance. This statement needs to show your loan balance and account number.
  • Proof of income with pay stubs or a job offer letter
  • Proof of residency with a utility bill or bank statement
  • Proof of citizenship or legal residency, such as your Social Security number or government ID number
  • Valid ID number, whether from a driver’s license or passport

If you’re applying with a cosigner, you’ll also need to provide their information. Once you submit a full application, the lender will run a hard credit inquiry to check your credentials.

If you have any questions along the way, make sure to contact the lender’s customer service team for guidance.

6. Set up autopay on your new refinanced student loan

It typically takes between one and three weeks before your refinanced student loan is up and running, according to Citizens Bank. In the meantime, keep paying off your old student loans so you don’t accidentally miss a payment.

Once your new lender gives you the green light, set up your online account and enable autopay on your student loan. Autopay lets the lender withdraw your monthly repayment from your bank account so you never miss a bill. Plus, many lenders give you a 0.25% discount off your interest rate for setting up autopay.

Note that you can always make extra payments to get out of debt faster if your income increases or you get a windfall of cash, such as a bonus from work. Just make sure that if you do this, you contact the lender to ensure that any extra payments are applied directly to the principal and not used to pay off interest for future payments.

Hunt for the best student loan refinancing rates

Now that you know how to refinance student loans, don’t forget to shop around with a few lenders. Each one is different, so comparing offers is the best way to find the lowest rates.

Also remember that as your circumstances change, you can always refinance again if it makes sense for you financially. By being proactive about your debt, you can save yourself money and stress as you pay back your student loans.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

TAGS: , ,

Advertiser Disclosure

College Students and Recent Grads

How Often Can I Refinance My Student Loans?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

iStock

Do you wish you could go back in time and make different choices about your student loans? Although you can’t “un-borrow” your debt, you do have a chance to restructure it through student loan refinancing.

Not only can refinancing save you money with a lower interest rate if you qualify, but it also lets you choose new repayment terms that better match your budget.

What’s more, you don’t have to refinance just once — you can refinance multiple times to save as much money as possible on your debt.

Here’s how refinancing your student loans more than once could be beneficial, along with some potential drawbacks to avoid.

How often can I refinance my student loans?

Refinancing student loans comes with a number of benefits, including lowering your interest rate if you qualify, lengthening or shortening your repayment and combining multiple loans into one. So given all the advantages, it’s natural to wonder how often can you refinance your student loans.

As it turns out, there’s really no limit to the number of times you can refinance your college debt, so long as you meet lender requirements for credit and income (or apply with a cosigner who does).

Lenders give the best rates to the most creditworthy borrowers. So if your credit has improved significantly since the last time you refinanced, applying again could get you even better terms than you received in the past.

3 potential benefits of refinancing multiple times

Chances are, filling out student loan paperwork isn’t your favorite pastime. But taking time to refinance your student loans more than once could be worth the effort. Here are three times when refinancing over and over could be advantageous.

Get an even lower interest rate

The main reason to refinance more than once would be if to snag a lower interest rate. Let’s say you owed $20,000 at a 6.00% rate and have five years left on your repayment term. Over those years, you’d pay $3,199 in interest. But if you could refinance to a 3.5% rate, you’d pay just $1,830 in interest over five years.

Lowering your rate might also mean having more affordable monthly payments. As a result, you might be able to pay more each month. By throwing extra payments at your loans, you’ll get out of debt ahead of schedule.

Switch from a variable rate to a fixed rate

Another reason to refinance more than once would be to switch from a variable rate to a fixed rate on your debt. Let’s say you refinanced a few years ago and chose a variable rate, which has since increased over the years.

To stop it from creeping up further, you might refinance again and choose a fixed rate, which will stay the same over the life of your loan. Even if you choose a longer repayment term, you won’t have to worry about your interest rate rising over time.

Choose new terms that work for your budget

Finally, refinancing allows you to pick new repayment terms, typically between five and 20 years. Let’s say you chose a long term when you refinanced the first time, but now you want a shorter term to get out of debt faster.

Or on the flip side, maybe you’ve run into some financial trouble and are struggling to afford your monthly payments. If that’s the case, you could lower them by choosing a longer term.

If your financial situation has changed, the choices you made when you refinanced the first time might no longer match your goals. If you’re looking for new terms on your debt, refinancing a second time could be a smart strategy.

Beware the downsides of refinancing more than once

While the answer to “How many times can you refinance a student loan?” might be “As many times as you want,” it’s a different story when you ask how often should you refinance student loans.

Refinancing multiple times could save you money, but there are some potential pitfalls as well. Here are the two main ones:

Be careful about accidentally adding years to your debt

As mentioned above, refinancing gives you the chance to choose new repayment terms. But if you’re not careful, you could end up adding years onto your debt.

Let’s say you chose a 10-year term when you refinanced two years ago, and you now only have eight years left on your loan. If you refinance again and choose a 10-year term, you’d be adding two years onto your debt.

Not only would you be in debt longer, but you would spend more on interest overall. If your goal is to save money, be careful you don’t unnecessarily lengthen your debt when refinancing for a second or third time.

Watch out for hidden costs and fees

Besides being careful about which repayment term you select, you must also watch out for extra costs associated with refinancing.

Some lenders charge an origination fee when disbursing a refinanced student loan, and others even charge an application fee.

That said, some of the best lenders, such as CommonBond, SoFi and Earnest, don’t charge any fees for refinancing student loans.

But make sure to read the fine print before you refinance again, so you don’t end up overspending on your student loans.

Make the most of instant rate quotes to find the best offer

Before refinancing again, shop around to see if you could qualify for a lower rate. Lenders such as SoFi and Earnest make it easy to get an instant rate quote.

To get a rate quote, you’ll just provide some basic information, such as your name, college and loan amount. The lender will then run a soft credit check, which won’t impact your credit report at all. Then, it will show you your prequalification offers and potential interest rates.

Check your rates with multiple lenders so that you can find the best offer and decide if it makes sense to refinance your student loans more than once.

How often should you refinance student loans? Final thoughts

Refinancing student loans has a number of financial benefits, so it stands to reason that refinancing more than once will only increase those benefits.

If your credit has improved or your income has risen since the last time you refinanced, you might be an even stronger candidate for a lower interest rate. What’s more, refinancing for a second time could allow you to restructure your debt in a way that better meets your present-day circumstances.

But be careful not to accidentally extend the life of your debt or overspend on fees. As long as you fully understand the terms and conditions, refinancing multiple times could work to your benefit.

Once your new loan is up and running, shift your attention to making on-time payments every month, or if possible, paying off your student loan ahead of schedule.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

TAGS: , ,

Advertiser Disclosure

College Students and Recent Grads

Student Loans by the Numbers: Average Student Loan Debt Statistics

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Source: ARENA Creative

The numbers don’t lie: As college costs have risen in recent decades, many students and their families have been forced to take out more student loans to keep up. Seeing the statistics behind college debt can help shine a light on how big the student loan crisis has become and whom it’s affecting most.

Average Student Loan Debt: In a Nutshell

  • The total amount of student debt in the U.S. has reached $1.53 trillion, making student loans the nation’s second-largest source of consumer debt, below only mortgages (and well above credit cards), according to the Federal Reserve.
  • The average student loan debt for each borrower at $36,314 owed across 3.3 student loans, according to a MagnifyMoney analysis of anonymized My LendingTree users’ September 2018 credit reports. (Note: LendingTree is MagnifyMoney’s parent company)
  • Nearly one in five adults (18.2%) in the U.S. has student debt, which is around 44 million Americans.
  • Outstanding student debt more than doubled (a 167% increase) over the past 10 years alone to its current peak. The number of Americans with student loan debt also rose 51% in the same period.
  • Across all types of institutions, the average annual cost of college was $23,091 in 2016-17. Students who borrow for college take out $6,988 in federal student loans per year, on average.

To get a complete picture of the situation, we’ve collected recent data on student loans, college costs and other student aid.

How Much Does College Cost?

In recent decades, college costs have shot up, often forcing today’s students and their families to pay more out of pocket and borrow more in student loans to cover educational expenses.

Here’s a look at the average college costs that today’s students face, by different types of institutions.

Average College Costs All Institutions

Tuition and
Fees

Dormitory
Rooms

Board

Total

All Institutions

$12,219

$6,106

$4,765

$23,091

Public Institutions

$6,817

$5,859

$4,561

$17,237

Nonprofit Institutions

$32,556

$6,704

$5,291

$44,551

For-Profit Institutions

$14,419

$6,889

$4,123

$25,431

Source: The National Center for Education Statistics

Average College Costs 4-Year Institutions

Tuition and
Fees

Dormitory
Rooms

Board

Total

All Institutions

$15,512

$6,231

$4,850

$26,593

Public Institutions

$8,804

$6,017

$4,666

$19,488

Nonprofit Institutions

$32,720

$6,709

$5,273

$44,702

For-Profit Institutions

$14,423

$6,996

$4,113

$25,532

Source: The National Center for Education Statistics

Average College Costs 2-Year Institutions

Tuition and
Fees

Dormitory
Rooms

Board

Total

All Institutions

$3,518

$3,931

$3,149

$10,598

Public Institutions

$3,156

$3,822

$3,113

$10,091

Nonprofit Institutions

$15,293

$5,609

$4,350

$25,252

For-Profit Institutions

$14,397

$6,290

$4,340

$25,027

Source: The National Center for Education Statistics

How Much Have College Costs Risen?

The cost of a college degree has risen much more steeply over the past five decades than overall inflation and wage growth.

Here’s a look at how college prices have changed over the past 50 years. Costs are adjusted for inflation and include room and board, tuition and other related fees.

How Are Students Using Financial Aid?

Student loans are just one form of financial aid that can help pay for a college degree. Gift aid — such as grants from the federal government, state or local organizations or from colleges themselves — can lower a student’s net college price and the need for student loan debt.

But as college costs have increased, student aid awards have not kept up. While most college students receive some form of student aid, just under half (45.7%) of students rely on student loans, borrowing nearly $7,000 a year.

Percentage of Students Who Receive Student Aid. 2015 - 2016 Academic Year

Institution Type

All Aid

Federal Grants

State/Local Grants

InstitutionaI Grants

Student Loans

All Institutions

82.7%

42.7%

32.3%

44.40%

45.7%

Public

80.2%

42.3%

37.3%

35.6%

38.2%

Nonprofit

89.6%

35.2%

23.8%

78.7%

60.9%

For-Profit

86.5%

69.8%

8.6%

25.3%

74.4%

Source: The National Center for Education Statistics

How Much Has Federal Student Loan Debt Risen?

The federal government remains the top source of student loan debt, lending far more than states, banks and other institutions. Of the $1.53 trillion in outstanding student debt, $1.38 trillion takes the form of federal student loans.

This college debt has increased by $860 billion since 2007, a sharp difference of 167% in just over 10 years. Meanwhile, the number of people who hold federal student loans has also risen from 28.3 million in 2007 to 42.8 million, a 51% increase.

How Much Do People Owe the Government in Student Debt?

Next, take a look at how much borrowers owe in federal student debt. The average student loan debt is $32,150 across all types of federal student loans.

But most borrowers owe far less than this, with a majority (57.3%) carrying $20,000 or less in federal student loan debt.

Six-figure student debt is, fortunately, still fairly rare, with just 5.5% of borrowers owing $100,000 or more in federal loans.

Student loan balances also vary by age, with borrowers ages 35 to 49 having the highest average student loan debt, at $37,051. That average then eases for those above 50, but not by that much. And, of course, borrowers who are college-aged (24 or younger) have the smallest balances, since this group includes those still taking out loans for their education.

Overall, borrowers between the ages of 25 to 49 account for the bulk of college debt, with just under a trillion, or $995.1 billion, of outstanding federal student loans.

Who Is Defaulting?

With balances this high, not all borrowers can keep up with student loan payment. If nine months of nonpayment pass, a federal student loan defaults.

Options such as taking student loan deferment and forbearance or enrolling in income-driven repayment plans can often be effective ways to avoid defaulting. But the data suggest that some borrowers still aren’t taking advantage of these federal student loan benefits.

In 2017, more than 1 in 10 borrowers who had left college in 2014 had since defaulted. Default rates are higher among students leaving two-year colleges and schools with programs shorter than two years.

For-profit colleges also tended to have higher rates of default, compared to public colleges and private nonprofit schools.

Percentage of people who defaulted since they entered their repayment phases three years ago (2014)

All Institutions

11.5%

Public

11.3%

Nonprofit

7.4%

For-profit

15.5%

Less-than-2-year institutions

17.0%

Public

13.80%

Nonprofit

19.80%

For-profit

17.0%

2-year institutions

18.2%

Public

18.3%

Nonprofit

17.6%

For-profit

17.5%

4-year institutions

9.0%

Public

7.5%

Nonprofit

7.0%

For-profit

14.6%

Source: The National Center for Education Statistics

What About Graduate Student Loan Debt?

Completing an advanced degree can also mean taking on a significant amount of debt, though here, not all graduate student debt is created equal. For example, 48.2% of research doctorate degree holders have student loan debt, but that proportion is significantly higher — 74.5% — for those with professional doctorate degrees.

Among those with graduate student loan debt, balances range from $50,300 among master’s degree holders up to $171,700 for those with professional doctorates.

Digging a little deeper, the data show that earning an advanced medical degree (such as an MD) comes with the highest levels of debt. Eight in 10 graduates with these degrees have student debt, with average student loan debt balances at $223,100.

What Do We Know About Private Student Loan Debt?

Besides federal student loan debt, private student loans from banks and other lenders are also an important piece of the puzzle. The amount of outstanding private student loan debt is $67.1 billion, most of which (88.3%) was borrowed for undergraduate studies.

Private Loans Outstanding

Q1 2018

Current Balance

$67.12 billion

% of Loans for Undergraduate School

88.3%

% of Loans for Graduate School Source: MeasureOne

11.7%

Source: MeasureOne

Repayment Status of Private Loans

Q1 2018

Grace

2.3%

Deferment

21.1%

Forbearance

2.5%

Repayment

74.1%

Source: MeasureOne

Percentage of Payable Private Loans Currently Delinquent

Q1 2018

30-89 days delinquent

2.8%

90+ days delinquent

1.50%

Charge-offs

1.80%

Source: MeasureOne

How Much Can That Expensive Degree Earn Me?

With college costs and average student loan debt levels on the rise, some borrowers might wonder whether their education is worth the price.

Overall, earning one or more degrees does substantially increase income. Someone with a bachelor’s degree earns 57.1% more on average than a worker with only a high school diploma. Those who hold a master’s degree or higher tend to earn twice as much as those with high school diplomas, and 28.2% more than graduates who hold a bachelor’s degree.

Of course, a college graduate’s course of study has a huge impact on their career opportunities and earning potential. Engineering fields offer the highest pay, with median salaries of $69,650 among college graduates. Studying theology and religious studies, on the other hand, resulted in the lowest pay at just $34,420 per year.

 Median Salary of Bachelor's Holders by Field of Study                   

Field of Study

2016

Agriculture

$44,590

Architecture

$50,000

% of Loans for Graduate School Source: MeasureOne

2016

Area, ethnic,and civilization studies

$44,260

Arts, fine and commercial

$39,830

Fine arts

$36,270

Commercial art and graphic desisn

$40,300

Business

$50,360

Business, general

$50,290

Accounting

$55,400

Business management and administration

$48,280

Marketing and marketing research

$50,200

Finance

$60,070

Management information systems and statistics

$59,950

Business, other and medical administration

$49,600

Communications and communications technologies

$45,260

Computer and information systems

$65,440

Construction/electrical/transportation technologies

$55,310

Criminal justice and fire protection

$40,990

Education

$40,240

General education

$40,270

Early childhood education

$35,940

Elementary education

$39,070

Secondary teacher education

$39,070

Education,other

$40,050

Engineering and eneineering-related fields

$69,650

General engineering

$63,770

Chemical engneering

$74,880

Civil engineering

$63,110

Computer engineering

$78,080

Electrical engineering

$74,790

Mechanical engineering

$71,860

Engineering, other

$65,480

Engineering technologies

$59,630

English language and literature

$40,280

Family and consumer sciences

$37,680

Health professions

$51,830

General medical and health services

$50,060

Nursing

56,350

History

$43,430

Liberal arts and humanities

$40,020

Linguistics and comparative language and literature

$42,040

Mathematics

$50,340

Multi/ interdisciplinary studies

$43,170

Natural sciences

$45,340

Biology

$45,330

Environmental science

$41,000

Physical sciences

$49,110

Physical fitness,parks,recreation and leisure

$40,080

Philosophy and religious studies

$39,810

Psychology

$40,100

Publicadm inistration and public policy

$56,460

Social sciences

$50,310

Anthropology and archeology

$39,800

Economics

$60,350

Geography

$45,210

lnternational relations

$52,290

Political science and government

$50,330

Sociology

$40,030

Miscellaneous social sciences

$42,190

Social work and human services

$36,200

Theology and religious vocations

$34,420

Other fields

$40,380

Source: The National Center for Education Statistics

How Many Students Are Leaving School Without Getting a Degree?

For students who have already taken out student debt, completing their degree could make the difference between easily repaying their loans or ending up in default.

Part-time students are much likelier to drop out of college overall, while for-profit college have the worst attrition rates in terms of types of institutions.

As student loan balances have grown, so has the impact of this debt has on borrowers’ lives. By understanding the numbers underlying the student debt crisis, we can better gauge its effects. Overall, though, a degree is still worth getting despite rising college costs and the amount of debt needed to pay them.

But today’s students and borrowers need to be wiser with their educational and financial choices to avoid the worst outcomes. As the data suggest, the type of school and the field of study can play a big role here.

Statistics can’t always capture individual cases, as one student’s situation won’t necessarily match the averages. But one thing that might hold true for most if not all borrowers is the importance of knowing your options to manage this debt. If you owe student loans, check out our top picks for refinancing student loans to help you get out of being another statistic in the ongoing student debt crisis.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Elyssa Kirkham
Elyssa Kirkham |

Elyssa Kirkham is a writer at MagnifyMoney. You can email Elyssa here

TAGS: ,

Advertiser Disclosure

College Students and Recent Grads

Should I Consolidate My Student Loans?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

iStock

Student loans are rarely simple. From choosing the right repayment plan to understanding how interest works, it’s easy to get confused.

It also doesn’t help that most students hold several student loans from multiple loan servicers. According to a 2017 Experian report, the average student loan borrower leaves school with 3.7 loans in their name.

If this describes you, you might be struggling to keep track of your various accounts and payments. Fortunately, there’s a solution that could help simplify matters: student loan consolidation.

This guide will explain what it means to consolidate student loans, along with the pros and cons of this a move. If you’ve been wondering “Should I consolidate student loans?”, read on to find your answer to that and other questions.

What is student loan consolidation?

Student loan consolidation involves combining multiple federal loans into one, using a direct consolidation loan. If you go this route, you’ll only have to worry about a single loan — with a single interest rate and single payment — instead of dealing with several student loan bills each month.

Your new interest rate will be the weighted average of your previous interest rates rounded up to the nearest one-eighth of a percent. Since your new rate is weighted, it’s pretty much the same as what you were dealing with previously. It will also be fixed, meaning the interest rate will stay the same over the life of your debt.

Along with simplifying repayment, consolidation can also make certain loans eligible for income-driven repayment plans. Plus, consolidating your student loans allows you to choose new repayment terms and even select a new loan servicer if you don’t like your old one.

Note that direct consolidation is a federal program, so only federal student loans, like direct loans (or Stafford loans) and parent PLUS loans, are eligible — you cannot include private student loans in federal consolidation.

Potential benefits of consolidating student loans

Direct loan consolidation comes with a variety of advantages for borrowers. Here are six of the most important ones:

1. Simplifying repayment by combining several loans into one

As its name suggests, consolidation is all about combining several loans into one. When you have a bunch of loans, it’s not hard to lose track of the different accounts and bills that make up your debt. Missing a payment could cause your debt to become delinquent — or worse, to go into default. Default could hurt your credit score and even lead to wage garnishment, not to mention being very stressful.

The simple act of consolidating loans could make it easier to track your debt and keep your repayments going out on time. You’re less likely to forget a student loan bill if you only have one to pay.

2. Lowering your monthly bills with new repayment terms

When you apply for direct loan consolidation, you have the chance to choose new repayment terms. For instance, you could put your loans on an income-driven repayment plan or extended repayment plan, either of which can lengthen your terms to 20 or 25 years.

By adding years onto your term, you can drastically cut your monthly payments. If your payments have become too burdensome, this approach could give you some breathing room.

Of course, the trade-off is that you’ll be in debt for longer and therefore will pay more interest overall. But lowering your monthly payment might be what you need to save your budget, at least until you start making more money in the future.

3. Making your loans eligible for income-driven repayment

Consolidating student loans also has the benefit of making certain loans eligible for income-driven repayment.

In most cases, parent PLUS loans, Stafford loans and federal family education loans are not eligible for income-driven repayment unless you consolidate them first. Note that parent loans only qualify for one of the four income-driven plans — Income-Contingent Repayment (ICR) — after you consolidate them.

So if you need income-driven repayment to adjust your monthly payments, you might be required to consolidate before you can select one of these plans.

4. Switching to a new loan servicer

Besides allowing you to choose a new repayment plan, consolidating also lets you select a new loan servicer. The federal student loan servicers currently include Great Lakes, Navient, Nelnet and others.

You can, of course, stick with your current loan servicer — but if you’ve have problems with your servicer, you do have the option to get a fresh start with a new one.

5. Get a fixed interest rate on your old student loans

These days, federal student loans all come with fixed interest rates, which remain the same over the life of your loan — but if you borrowed years ago, your student loan might have a variable rate. Variable rates can fluctuate over time, costing you extra money in interest. If you’d prefer a fixed interest rate, consolidating could help you get it.

6. Rehabilitate student loans that have fallen into default

Finally, consolidating federal student loans is one strategy for getting your student loans out of default. If your loans are in default, you can rehabilitate them through consolidation if you agree to pay the debt back on an income-driven plan or make three on-time payments first.

Once your consolidation application is approved, your loans will return to good standing and you’ll once again be eligible for federal programs, such as deferment, forbearance and loan forgiveness.

Potential drawbacks of consolidation

Although consolidation can have a variety of benefits, it’s not for everyone. Consider these four possible downsides of consolidating before making changes to your student loans.

1. You might spend more on interest overall

If you lower your monthly payments by consolidating, you could end up spending more money on student loan interest overall. When you choose a longer repayment term, your debt has additional years to accumulate interest.

Let’s say you borrow $25,000 at a 5.05% rate. After 10 years, you’d pay $6,893 in interest. But if you double the term, then after 20 years you’d end up paying $14,763 in interest, more than twice the amount.

So even though a longer repayment term offers financial relief in the short term, it could actually cost you a lot more in the long run.

2. You might reset the clock on your eligibility for student loan forgiveness

Federal student loans come with a number of government-backed protections and benefits, including the opportunity to receive student loan forgiveness.

Programs like Public Service Loan Forgiveness (PSLF) promise to wipe away your college debt after a given number of years of qualifying work. Alternatively, you could get your balance forgiven after 20 or 25 years of repayment on an income-driven plan.

However, consolidating during that time could reset the clock on your path to loan forgiveness. If you’re already five years into your service for PSLF or your repayment on an income-driven plan, consolidating could bring you back to square one.

That said, sometimes you may need to consolidate before you’re eligible for either program anyway. If you stayed on the standard 10-year plan and were aiming for PSLF, for instance, you’d have nothing left to forgive after 10 years. Just make sure you consolidate at the beginning, rather than waiting years and having to start from scratch.

3. You have to be careful about consolidating Parent PLUS Loans

In most cases, parent PLUS loans and other educational debt taken out by parents aren’t eligible for income-driven repayment unless you consolidate them first. But you’ll need to be careful about consolidating a student loan you borrowed for your own education together with one you borrowed on behalf of your child.

Your own student loans might qualify for a variety of repayment plans, but a consolidated loan that contains a parent loan will only qualify for ICR. So be careful about combining personal debt with parental debt, as it could leave you with fewer options for repayment.

4. Your private student loans aren’t eligible

A final downside of direct loan consolidation is that it doesn’t work for private student loans. If you borrowed from a private lender, such as a bank or online provider, you won’t be able to combine your loans through federal loan consolidation.

Direct loan consolidation is different from student loan refinancing

Federal student loan consolidation isn’t the only way to combine your loans into one. You can also achieve this by refinancing with a private lender.

When you refinance, you can take multiple loans — whether federal or private — and exchange them for a new loan with a new rate.

As long you meet requirements for credit and income, you could snag a lower interest rate and save money on your debt.

You can also choose new terms, perhaps lengthening it to lower your monthly payment or selecting a shorter term to get out of debt more quickly.

But just like with federal consolidation, private refinancing also has potential downsides.

For example, when you refinance federal student loans, you turn them into a private one. As a result, you lose access to federal plans and programs like income-driven repayment, PSLF and federal deferment and forbearance.

If you don’t need any of these federal options, this sacrifice might not be a big deal. But if you’re worried about paying back your loan or are aiming for loan forgiveness, refinancing with a private lender probably isn’t the right strategy.

If you do decide to refinance, make sure to shop around and compare offers from multiple lenders — that way, you can find a refinanced student loan with the best terms and lowest rate.

Should I consolidate my student loans?

Whether you’re considering federal consolidation or private refinancing, don’t rush into your decision. You should first familiarize yourself with all the pros and cons before making changes to your debt and weigh both the short- and long-term consequences.

If you’re looking to simplify repayment or make your loans eligible for an income-driven plan, consolidation could be the right approach. But if you’re seeking a lower interest rate, refinancing could be the better option.

Whatever you choose to do, keep chipping away at your debt with on-time monthly payments. Although your loans might take years to pay off, eventually you’ll send off that last payment and be free of your student debt.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

TAGS: , ,

Advertiser Disclosure

College Students and Recent Grads, Pay Down My Debt

7 Best Options to Refinance Student Loans – Get Your Lowest Rate

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Updated: December 2, 2018

Are you tired of paying a high interest rate on your student loan debt? You may be 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. We recommend you start here and check rates from the top 7 national lenders offering the best student loan refinance products. All of these lenders (except Discover) also allow you to check your rate without impacting your score (using a soft credit pull), and offer the best rates of 2018:

LenderTransparency ScoreMax TermFixed APRVariable APRMax Loan Amount 
SoFiA+

20


Years

3.90% - 7.98%


Fixed Rate*

2.47% - 6.99%


Variable Rate*

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on SoFi’s secure website

EarnestA+

20


Years

3.99% - 7.89%


Fixed Rate

2.57% - 6.97%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on Earnest’s secure website

CommonBondA+

20


Years

3.67% - 7.57%


Fixed Rate

2.50% - 7.24%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on CommonBond’s secure website

LendKeyA+

20


Years

5.38% - 8.82%


Fixed Rate

2.57% - 8.09%


Variable Rate

$125k / $175k


Undergrad/Grad
Max Loan
Learn more Secured

on LendKey’s secure website

Laurel Road BankA+

20


Years

3.50% - 7.02%


Fixed Rate

3.05% - 6.47%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on Laurel Road Bank’s secure website

Citizens BankA+

20


Years

3.90% - 9.99%


Fixed Rate

2.82% - 9.56%


Variable Rate

$90k / $350k


Undergraduate /
Graduate
Learn more Secured

on Citizens Bank (RI)’s secure website

Discover Student LoansA+

20


Years

5.24% - 8.24%


Fixed Rate

4.87% - 8.12%


Variable Rate

$150k


Undergraduate /
Graduate
Learn more Secured

on Discover Bank’s secure website

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.

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.
LenderMinimum credit scoreEligible degreesEligible loansAnnual income
requirements
Employment
requirement
 
SoFi

Good or Excellent
score needed

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on SoFi’s secure website

Earnest

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on Earnest’s secure website

CommonBond

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on CommonBond’s secure website

LendKey

680

Undergraduate
& Graduate

Private & Federal

$24K

Yes

Learn more Secured

on LendKey’s secure website

Laurel Road Bank

Not published

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on Laurel Road Bank’s secure website

Citizens Bank

680

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

$24K

Yes

Learn more Secured

on Citizens Bank (RI)’s secure website

Discover Student Loans

Not published

Undergraduate
& Graduate

Private & Federal

None

Yes

Learn more Secured

on Discover Bank’s secure website

Diving Deeper: The best 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 7 lenders offering the lowest interest rates:

1. SoFi

LEARN MORE Secured

on SoFi’s secure website

Read Full Review

SoFi : Variable rates from 2.47% and Fixed Rates from 3.90% (with AutoPay)*

SoFiwas one of the first lenders to start offering student loan refinancing products. More MagnifyMoney readers have chosen SoFi than any other lender. The only requirement is that you graduated from a Title IV school. In order to qualify, you need to have a degree, a good job and good income.

Pros Pros

  • Borrowers can refinance private, federal and Parent PLUS loans together: Through SoFi, borrowers have the ability to combine all of their student loans (private, federal and Parent PLUS) when refinancing. Along with the ability to refinance Parent PLUS loans, parents can also transfer the PLUS loans into their child’s name.
  • Access to career coaches: SoFi offers their borrowers access to their Career Advisory Group who work one-on-one with borrowers to help plan their career paths and futures.
  • Unemployment protection: SoFi offers some help if you lose your job. During the period of unemployment they will pause your payments (for up to 12 months) and work with you to find a new job. However, just remember that any unemployment protection offered by SoFi would be weaker than the income-driven repayment options of federal loans.

Cons Cons

  • No cosigner release: While they offer you the opportunity to refinance with a cosigner, it is important to know that SoFi does not offer borrowers the opportunity to release a cosigner later on down the road.
  • You lose certain protections if you refinance a federal loan: This con is not unique to SoFi (and you will find it with all other private lenders). Federal loans come with certain protections, including robust income-driven payment protection options. You will forfeit those protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

SoFi is really the original student loan refinance company, and is now certainly the largest. SoFi has consistently offered low interest rates and has received good reviews for service. In addition, SoFi invests heavily in building a “community” – which means you can start to get other benefits once you are a SoFi member.

SoFi has taken a radical new approach when it comes to the online finance industry, not only with student loans but in the personal loan, wealth management and mortgage markets as well. With their career development programs and networking events, SoFi shows that they have a lot to offer, not only in the lending space but in other aspects of their customers lives as well.

2. Earnest

LEARN MORE Secured

on Earnest’s secure website

Read Full Review

Earnest : Variable Rates from 2.57% and Fixed Rates from 3.99% (with AutoPay)

Earnest focuses on lending to borrowers who show promise of being financially responsible borrowers. Because of this, they offer merit-based loans versus credit-based ones. 

Pros Pros

  • Flexible repayment options: Earnest offers some of the most flexible options when it comes to repayment. They allow you to choose any term length between 5-20 years. 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.
  • Ability to switch between variable and fixed rates: With Earnest, 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.
  • Loans serviced in-house: Earnest is one of just a few lenders that provides in-house loan servicing versus using a third-party servicer.

Cons Cons

  • Cannot apply with a cosigner: Unlike many of the other lenders, Earnest does not allow borrowers to apply for student loan refinancing with a cosigner.
  • No option to transfer Parent PLUS loans to Child: If you are a parent that is looking to refinance your Parent PLUS loan into your child’s name, it is important to note that this cannot be done through refinancing with Earnest.
  • You lose certain protections if you refinance a federal loan: When refinancing with any private lender, you will give up certain protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

Earnest, who was recently acquired by Navient, is making a name for themselves within the student refinancing space. With their flexible repayment options and low rates, they are definitely an option worth exploring.

3. CommonBond

LEARN MORE Secured

on CommonBond’s secure website

Read Full Review

CommonBond : Variable Rates from 2.50% and Fixed Rates from 3.67% (with AutoPay)

CommonBond 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).

Pros Pros

  • Hybrid loan option: CommonBond offers a unique “Hybrid” rate option in which rates are fixed for five years and then become variable for five years. This option can be a good choice for borrowers who intend to make extra payments and plan on paying off their student loans within the first five years. If you can a better interest rate on the Hybrid loan than the Fixed-rate option, you may end up paying less over the life of the loan.
  • Social promise: 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.
  • “CommonBridge” unemployment protection program: CommonBond is here to help if you lose your job. Similar to SoFi, they will pause your payments and assist you in finding a new job.

Cons Cons

  • Does not offer refinancing in the following states: Idaho, Louisiana, Mississippi, Nevada, South Dakota and Vermont.
  • You lose certain protections if you refinance a federal loan: When refinancing with any private lender, you will give up certain protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

CommonBond not only offers low rates but is also making a social impact along the way. Consider checking out everything that CommonBond has to offer in term of student loan refinancing.

4. LendKey

LEARN MORE Secured

on LendKey’s secure website

Read Full Review

LendKey : Variable Rates from 2.57% and Fixed Rates from 5.38% (with AutoPay)

LendKey works with community banks and credit unions across the country. Although you apply with LendKey, your loan will be with a community bank. 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.

Pros Pros

  • Opportunity to work with local banks and credit unions: LendKey is a platform of community banks and credit unions, which are known for providing a more personalized customer experience and competitive interest rates.
  • Offers interest-only payment repayment: Many of the lenders on LendKey offer the option to make interest-only payments for the first four years of repayment.

Cons Cons

  • Rates can vary depending on where you live: The rate that is advertised on LendKey is the lowest possible rate among all of its lenders, and some of these lenders are only available to residents of specific areas. So even if you have an excellent credit report, there is still a possibility that you will not receive the lowest rate, depending on geographic location.
  • No Parent PLUS refinancing available: Unlike several of the other student loan refinancing companies, borrowers do not have the ability to refinance Parent PLUS loans with LendKey.
  • You lose certain protections if you refinance a federal loan: As when refinancing federal loans with any private lender, you will give up your federal protections if you refinance your federal loan to a private one.

Bottom line

Bottom line

LendKey is a good option to keep in mind if you are looking for an alternative to big bank lending. If you prefer working with a credit union or community bank, LendKey may be the route to uncovering your best offer.

5. Laurel Road Bank

LEARN MORE Secured

on Laurel Road Bank’s secure website

Read Full Review

Laurel Road Bank : Variable Rates from 3.05% and Fixed Rates from 3.50% (with AutoPay)

Laurel Road Bank offers a highly competitive product when it comes to student loan refinancing.

Pros Pros

  • Forgiveness in the case of death or disability: They may forgive the total student loan amount owed if the borrower dies before paying off their debt. In the case that the borrower suffers a permanent disability that results in a significant reduction to their income,Laurel Road Bank may forgive some, if not all of the amount owed.
  • Offers good perks for Residents and Fellows: Laurel Road Bank allows medical and dental students to pay only $100 per month throughout their residency or fellowship and up to six months after training. It is important for borrowers to keep in mind that the interest that accrues during this time will be added on to the total loan balance.

Cons Cons

  • Higher late fees: While many lenders charge late fees,Laurel Road Bank’s late fee can be slightly steeper than most at 5% or $28 (whichever is less) for a payment that is over 15 days late.
  • You lose certain protections if you refinance a federal loan: While not specific to Laurel Road Bank, it is important to keep in mind that you will give up certain protections when refinancing a federal loan with any private lender.

Bottom line

Bottom line

As a lender,Laurel Road Bank prides itself on offering personalized service while leveraging technology to make the student loan refinancing process a quick and simple one. Consider checking out their low-rate student loan refinancing product, which is offered in all 50 states.

6. Citizens Bank

LEARN MORE Secured

on Citizens Bank (RI)’s secure website

Read Full Review

Citizens Bank (RI) : Variable Rates from 2.82% and Fixed Rates from 3.90% (with AutoPay)

Citizens Bank offers student loan refinancing for both private and federal loans through its Education Refinance Loan.

Pros Pros

No degree is required to refinance: If you are a borrower who did not graduate, with Citizens Bank, you are still eligible to refinance the loans that you accumulated over the period you did attend. In order to do so, borrowers much no longer be enrolled in school.

Loyalty discount: Citizens Bank offers a 0.25% discount if you already have an account with Citizens.

Cons Cons

Cannot transfer Parent PLUS loans to Child: If you are looking to refinance your Parent PLUS loan into your child’s name, this cannot be done through Citizens Bank.

You lose certain protections if you refinance a federal loan: Any time that you refinance a federal loan to a private loan, you will give up the protections, forgiveness programs and repayment plans that come with the federal loan.

Bottom line

Bottom line

The Education Refinance Loan offered by Citizens Bank is a good one to consider, especially if you are looking to stick with a traditional banking option. Consider looking into the competitive rates that Citizens Bank has to offer.

7. Discover

LEARN MORE Secured

on Discover Student Loans’s secure website

Discover Student Loans : Variable Rates from 4.87% and Fixed Rates from 5.24% (with AutoPay)

Discover, with an array of competitive financial products, offers student loan refinancing for both private and federal loans through their private consolidation loan product.

Pros Pros

  • In-house loan servicing: When refinancing with Discover, they service their loans in-house versus using a third-party servicer.
  • Offer a variety of deferment options: Discover offers four different deferment options for borrowers. If you decide to go back to school, you may be eligible for in-school deferment as long as you are enrolled for at least half-time. In addition to in-school deferment, Discover offers deferment to borrowers on active military duty (up to 3 years), in eligible public service careers (up to 3 years) and those in a health professions residency program (up to 5 years).

Cons Cons

  • Performs a hard credit pull: While most lenders do a soft credit check, Discover does perform a hard pull on your credit.
  • No Parent PLUS refinancing available: Discover does not offer borrowers the option of refinancing their Parent PLUS loans.
  • You lose certain protections if you refinance a federal loan: Be careful when deciding to refinance your federal student loans because when doing so, you will lose access federal protections, forgiveness programs and repayment plans.

Bottom line

Bottom line

If you’re looking for a well-established bank to refinance your student loans, Discover may be the way to go. Just keep in mind that if you apply for a student loan refinance with Discover, they will do a hard pull on your credit.

 

Additional Student Loan Refinance Companies

In addition to the Top 7, 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:

Traditional Banks

  • First Republic Eagle Gold. The interest rates are great, but this option is not for everyone. Fixed rates range from 1.95% – 4.45% APR. You need to visit a branch and open a checking account (which has a $3,500 minimum balance to avoid fees). Branches are located in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich or New York City. Loans must be $60,000 – $300,000. First Republic wants to recruit their future high net worth clients with this product.
  • 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 4.74% and fixed rates starting at 5.24%. You would likely get much lower interest rates from some of the new Silicon Valley lenders or the credit unions.

Credit Unions

  • Alliant Credit Union: Anyone can join this credit union. Interest rates start as low as 3.75% APR. You can borrow up to $100,000 for up to 25 years.
  • Eastman Credit Union: Credit union membership is restricted (see eligibility here). Fixed rates start at 6.50% and go up to 8% APR.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve (or have served), the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 4.07% and fixed rates start at 4.70%.
  • Thrivent: Partnered with Thrivent Federal Credit Union, Thrivent Student Loan Resources offers variable rates starting at 4.13% APR and fixed rates starting at 3.99% APR. It is important to note that in order to qualify for refinancing through Thrivent, you must be a member of the Thrivent Federal Credit Union. If not already a member, borrowers can apply for membership during the student refinance application process.
  • UW Credit Union: This credit union has limited membership (you can find out who can join here, but you had better be in Wisconsin). You can borrow from $5,000 to $150,000 and rates start as low as 3.87% (variable) and 3.99% APR (fixed).

Online Lending Institutions

  • Education Loan Finance:This is a student loan refinancing option that is offered through SouthEast Bank. They have competitive rates with variable rates ranging from 2.55% – 6.01% APR and fixed rates ranging from 3.09% – 6.69% APR.
  • EdVest: This company is the non-profit student loan program of the state of New Hampshire which has become available more broadly. Rates are very competitive, ranging from 4.29% – 7.89% (fixed) and 4.29% – 7.89% APR (variable).
  • IHelp : This service will find a community bank. Unfortunately, these community banks don’t have the best interest rates. Fixed rates range from 4.00% to 8.00% APR (for loans up to 15 years). If you want to get a loan from a community bank or credit union, we recommend trying LendKey instead.
  • Purefy: Purefy lenders offer variable rates ranging from 2.82%-8.42% APR and fixed interest rates ranging from 3.75% – 9.66% APR. You can borrow up to $150,000 for up to 15 years. Just answer a few questions on their site, and you can get an indication of the rate.
  • RISLA: Just like New Hampshire, the state of Rhode Island wants to help you save. You can get fixed rates starting as low as 3.49%. And you do not need to have lived or studied in Rhode Island to benefit.

Is it worth it to refinance student loans?

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 student loans, 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.

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 refinancing, 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 your student loans 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.

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.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

TAGS: , ,