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College Students and Recent Grads, Reviews, Student Loan ReFi

Review: Laurel Road Bank Parent PLUS Loan Refinancing

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements 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.

Loan Refinancing

Updated June 15, 2017

Laurel Road Bank is one of a select few lenders that will refinance Parent PLUS loans. You may qualify for this refinance if your child has graduated and is now employed.

This refinance can potentially save you a great deal of money if you have a strong credit history because the interest rates are so competitive. For example, currently Parent PLUS rates are 6.84% for loans disbursed between July 2015 and July 2016. Laurel Road Bank offers fixed rates from 3.50% to 7.02% APR depending on creditworthiness, so even those getting the high-end of interest rates could see savings.

Another benefit of the Laurel Road Bank refinance is your child may qualify to refinance Parent PLUS loans with his or her own student loans from Laurel Road Bank to relieve you of financial responsibility.

Laurel Road Bank Parent PLUS Refinance Overview

Fixed interest rates range from 3.50% to 7.02% APR. Variable interest is 2.50% to 6.65% APR. Unlike fixed interest, variable interest can fluctuate during the life of your loan depending on market conditions. Laurel Road Bank has an interest cap of 9% for the 5, 7 and 10-year loan terms. For the 15 and 20-year loan terms, the variable interest cap is 10%.

In most cases, fixed interest is your preferred method of refinancing. Because even a high-end APR with Laurel Road Bank is lower than the federal Parent PLUS loan APR, the only scenario where variable interest may be a good choice is if you plan to pay off the loan quickly to take full advantage of low interest rates. Otherwise, a variable rate for a long-term loan can be risky and can rise to 9% to 10% APR based on Laurel Road Bank’s rate cap.

The minimum amount you can refinance is $5,000 and Laurel Road Bank will refinance up to 100% of your Parent PLUS loans. Laurel Road Bank interest rates include a 0.25% discount for using auto-pay, which is a common discount with student loan refinances.

However, with this refinance you have to make your auto-payments through a Laurel Road Bank checking account to qualify for the discount, which can be a hassle if you don’t bank with them. The Laurel Road Bank checking accounts are free and if you don’t have one you can apply for one during the application process, but they don’t have many branches, so you’ll most likely have to deal with them via ATMs and direct deposit. There are no ATM fees and Laurel Road Bank will refund up to $25 for fees charged by other bank ATMs.

[5 Options to Refinance a Parent PLUS Loan]

Laurel Road Bank Parent PLUS Loan Qualifications

To qualify for a Laurel Road Bank loan, you must be a U.S. Citizen or permanent resident and your child must have completed his or her degree. In terms of creditworthiness, Laurel Road Bank looks for borrowers who have loans in good standing, make more than $50,000 annually and have no adverse credit history. Laurel Road Bank does accept cosigners if you don’t meet the eligibility requirements on your own or if you want to qualify for a lower rate.

Fees & Gotchas

The Laurel Road Bank Parent PLUS refinance is low on fees. There are no application fees, processing fees or prepayment fees. You’re given a 15-day grace period before you get a late fee. After the 15th day you’ll get a 5% or $28 late fee, whichever one is less. The returned payment fee is $20.

Pros and Cons

The clear pro of refinancing a Parent PLUS loan with Laurel Road is the savings on interest payments. Generally, parents have many years worth of credit history, which puts them in a good place to nab a more competitive interest rate.

Laurel Road Bank also offers full or partial forbearance to pause payments without penalty if you experience financial hardship. Of course, you have to apply for it and get approved. A Laurel Road Bank loan can also be forgiven if you pass away or become disabled.

The key disadvantage of refinancing a government-backed loan (like the Parent PLUS) is missing out on federal loan protections. These protections come in handy if you fall on hard times. They include income-contingent payments, which can lower your monthly payment if your income is below a certain level, as well as forbearance. Forbearance allows you to stop making payments for up to 12 months, but interest will still accrue during this time. With discretionary forbearance, such as financial hardship or illness, your lender will decide whether or not to approve you.

[Making a Parent PLUS Loans Eligible for Income-Driven Repayment Plans]

Before you refinance a Parent PLUS loan, you should be 100% confident you can make on-time payments with the monthly payment you have today. You should also have a solid understanding of what benefits you’ll no longer qualify for when you refinance to a private loan.

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Parent PLUS Refinance Alternatives

How does Laurel Road Bank stack up to other available Parent PLUS refinances?

SoFi offers a Parent PLUS refinance as well. SoFi currently has variable rates from 2.50% to 7.12% APR with autopay. Fixed interest rates range from 3.89% to 7.62% APR (if you sign up for auto-pay). Like Laurel Road Bank, SoFi offers some benefits if you face financial hardship like unemployment insurance if you get laid off. It has no application, origination or prepayment fees.

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Citizens Bank has fixed interest from 6.64% APR. The interest rates include up to 0.50% in discounts. You get a 0.25% discount for using auto-pay and another 0.25% discount if you have an open Citizens Bank (RI) account before applying. Citizens Bank (RI) allows you to use a co-signer and the co-signer can be discharged after you make 36 on-time payments.

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Who Will Benefit Most From the Laurel Road Bank Parent PLUS Refinance?

If you’re a parent with a PLUS loan in good standing, excellent credit and a stable income, you can benefit from the Citizens Bank (RI) Parent PLUS loan. Keep in mind, the lowest interest rates are for people with the very best credit. So, the interest rate you receive may or may not be less than the one you already have. Even if Citizens Bank (RI) sounds like the fit for you, take the time to shop around and find the best rate. Checking rates will only be reflected as one inquiry on your credit score if you shop around within  30-day window.

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.

Taylor Gordon
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Taylor Gordon is a writer at MagnifyMoney. You can email Taylor here

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College Students and Recent Grads

Facing Private Student Loan Default? Here Are Your Options

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements 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.

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While federal student loans come with a number of flexible repayment plans, private loans typically aren’t so forgiving. So if you’re struggling to pay your bills, it can be tougher to avoid private student loan default than it would be with federal debt.

To make a bad situation worse, defaulting on private student loans (or any loans, for that matter) comes with some nasty consequences. Your credit score could be seriously damaged, for instance, and you might end up in court.

But while the consequences of defaulted private student loans are serious, they’re also solvable. Here’s what you need to know about private student loan default and how to prevent it if it hasn’t yet occurred.

What causes private student loan default?

If you’ve got student debt, you know that not paying them could lead to default. But missed payments aren’t the only action that results in defaulted private student loans. Here are three reasons your school debt could go into default status.

1. You missed payments

As with federal student loans, private loans go into default if you don’t pay your bills. But while the federal government allows for a 270-day delinquency period before your unpaid loans are placed default status, private lenders don’t give this much wiggle room.

Some allow for three to four months of delinquency before reporting your loan as defaulted; others will label your loan as defaulted after a single missed payment.

2. Your cosigner declares bankruptcy or dies

If you borrowed private student loans for your undergraduate education, chances are you applied with a cosigner, such as a parent. Because your cosigner shares this debt, their actions can affect its status.

Even if you’re making on-time payments, your loan could potentially be considered in default if your cosigner declares bankruptcy, and in some cases it automatically goes into default if the cosigner passes away.

3. You declare bankruptcy or default on other debts

Finally, your private student loan could enter default if you file for bankruptcy or default on other debts. Even if you’re paying your student loan on time, these other financial events could trigger default. If you’re in this situation, speak with your lender or examine your student loan contract to see what could happen.

7 consequences of defaulting on private student loans

If any of these events trigger private student loan default, here’s what could happen next.

1. Your lender demands full and immediate repayment

Chances are, you defaulted on your private student loans because you couldn’t afford monthly payments. But, ironically, defaulting means your lender will likely demand full and immediate repayment of the entire loan.

Because you missed payments, your original repayment plan becomes null and void. Since this agreement is canceled, the lender may ask you to repay the debt in full.

Of course, you probably aren’t able to pay back the entire loan all at once, so you’ll need to find other ways to fix this situation.

2. Your credit score will plummet

Your lender will report your defaulted private student loan to the credit bureaus. Since a big part of your credit score is based on on-time repayment of debt, your score will likely take a serious hit.

This red mark will show up on your credit history, making it difficult to take out another loan or get other forms of credit in the future. In most cases, negative marks can stay on your credit for up to seven years, unless you’re able to file a successful dispute and get them removed.

3. Your loan could get sent to collections

After you default, your lender might send your loan to a collections agency. Once this happens, expect to get lots of calls and mail from collections agents requesting repayment.

That said, it’s illegal for collections agents to harass you — for example, they’re not supposed to contact you before 8 a.m., after 9 p.m., or at work if you’ve asked them not to. Protect yourself by understanding your rights as a borrower.

4. You might owe additional collections fees

If your loan gets sent to collections, you might get charged extra fees. Whether set by your initial contract or state law, these fees could make your debt even more expensive, sometimes even adding 25% to 40% to your balance.

5. You could get sued

If you don’t respond to attempts to collect the debt, your debt collector could bring you (and your cosigner) to court. This is more common if the lender thinks you have the means to pay back your loan but are choosing not to (and less common if you truly are in dire financial straits).

Once in court, the lender will have to verify that your debt is legitimate with the right documentation. If the debt collector wins, it could take more extreme action to collect your money.

6. You might face wage garnishment or property liens

Let’s say you go to court and lose. If it gets the appropriate court order, the debt collector could actually garnish your wages or seize your assets. This could mean it puts a lien against any property you own or a financial levy on your bank accounts.

7. You might run out the clock on your debt’s statute of limitations

As you can see, the consequences of defaulting on private student loans can get extremely serious, even leading to wage garnishment or withdrawals from your bank account. But don’t forget that you have rights as a borrower, one of which involves a statute of limitations on debt.

These statutes of limitations vary by state and typically range from three to 10 years for private student loans. Once the time limit is up, the lender can’t take any legal recourse against you.

Of course, waiting out the clock on your student debt is seriously risky for all the reasons mentioned above. Plus, you must be careful not to reset the clock on the statute of limitations. If you resume repayment at any time, for instance, the clock could start again from zero.

How to prevent defaulting on student loans

If you’re worried about falling behind on private student loan payments, here are four actions that could help your situation.

1. Try to postpone payments through temporary forbearance

Let’s say you can’t pay back your private student loan because you lost your job or are going back to school. While private lenders don’t have the same flexible repayment plans as the federal government, some will let you temporarily postpone payments through forbearance.

Although interest will continue to accrue, pausing payments could give you the relief you need until you get back on your feet. You’ll be able to stop making payments for a while without worrying about going into default. If you’re struggling, talk to your lender about temporary forbearance or deferment.

2. Speak with your lender about reduced monthly payments

Even if your lender won’t let you pause payments completely, they might be willing to reduce your monthly payments for a period of time. After all, they’d rather have you pay something on your debt than stop making payments completely.

Whether it’s interest-only payments or another adjusted amount, ask about your options. Even if the lender doesn’t list alternative payment plans on its website, it’s always worth calling to see if it can be accommodating.

3. Refinance your student loans for new terms

One surefire way to restructure your debt with new terms and monthly payments is through student loan refinancing. When you refinance, you can choose a new repayment plan, often between five and 20 years.

If your bills are burdensome, a longer plan could be the solution you need. Even though you’ll probably pay more interest over the life of your loan, the lower monthly payments could make your debt easier to manage.

That said, not everyone will qualify for student loan refinancing. You’ll need to pass a credit and income check to qualify for refinancing, or apply with a cosigner who can.

4. Explore student loan repayment assistance programs

While private student loans aren’t eligible for federal forgiveness programs, like Public Service Loan Forgiveness, they might qualify for private- or state-run loan repayment assistance programs (LRAPs). These programs typically offer thousands of dollars in loan assistance in exchange for working or living in a certain area.

Some employers also offer a student loan matching benefit, which could help you get rid of your debt faster. If you’re job searching, consider applying to a company that could help you pay off your student loans.

Already defaulted? 3 steps that could help

The steps above can help you avoid private student loan default, but here’s what you can do if it’s already happened.

1. Dispute the debt

Maybe debt collectors are ringing your phone off the hook, but something feels wrong. If you’re not convinced you owe this defaulted private student loan, it could be worth disputing the debt.

As long as you make your dispute within 30 days of hearing from a debt collector, that collector will be legally obligated to provide full verification of the loan’s originations.

If the collector can’t provide this documentation — or if you discover a mismatch with your own records — you could be able to prove the debt is invalid or you don’t owe as much as the collector claims.

2. Pay your loan back in full

Although full and immediate repayment is probably unrealistic for most borrowers, it is worth mentioning as a way to get out of default. Paying off your entire balance at once will stop the default. If you’ve saved up a large sum or get an unexpected windfall, consider throwing it at your debt to get out of default once and for all.

3. Speak with a student loan lawyer

Finally, consulting a student loan lawyer could be a helpful step. The lawyer could help you understand your options, and explain how your particular state treats defaulted private student loans. It could especially be smart to consult a lawyer if the debt collector has summoned you to court.

And if you don’t have the funds to pay for legal aid, you may be able to find low-cost or free assistance via the Amercian Bar Association’s pro-bono listings or the Legal Services Corporation.

Try your best to avoid defaulting on private student loans

In recent years, some borrowers have intentionally defaulted on their private student loans in protest over the student loan crisis burdening millions of Americans. But whatever you think of the financial situation we’re in, defaulting on your student loans could cause more harm than good.

As you can see, defaulting can damage your credit for years, and invite frequent calls and letters from debt collectors. You could even be brought to court, where a lender could get the right to withdraw money straight from your bank account.

Outside of these financial and legal repercussions, defaulting on student loans is sure to cause a ton of stress and anxiety. So if you’re struggling to pay your bills, try your best to speak with your lender before default occurs.

By keeping open communication, hopefully you and your lender can agree to a repayment plan that keeps your loan in good status without it being too much of a burden on your bank account.

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

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College Students and Recent Grads

Private Student Loan Requirements and How to Fulfill Them

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements 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.

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As long as you don’t go overboard, private student loans can be a useful tool for covering college costs. But don’t forget that private lenders set their own requirements for student loans, which differ from those set by the federal government.

If you’re looking to borrow, you’ll need to know how to qualify for private student loans, as well as how to find the best rates. Here are the five main private student loan requirements, followed by some tips on finding the most affordable student loan.

1. You’re a student (or parent) who meets citizenship and age requirements

As the name implies, private student loans are reserved for students — this means you’ve enrolled in college or graduate school for the coming semester. Some lenders also require that you’re attending at least half-time.

However, there are also lenders that offer loans to parents paying for their child’s education. Sallie Mae’s Parent Loan, for example, lets parents cover the full school-certified cost of attendance at their child’s college, graduate school or other degree-granting program.

Either way, the borrower typically must be a U.S. citizen or legal resident who’s 18 years of age or older.

2. You’re enrolled in an eligible school

Not only must you meet certain requirements for private student loans, but your school has to be eligible as well. Each private lender will have its own student loan requirements, lending to some schools but not others.

Check with the individual lender to ensure your school qualifies. Note that some lenders only operate in certain states, so your location could also play a factor here.

3. You need funding for qualifying educational expenses

You might love a few thousand dollars in your pocket for spring break, but private student loans are supposed to be used only for qualifying educational expenses, such as tuition, fees, books and living costs.

After you apply for a private student loan, the lender will likely talk to your school’s financial aid office to verify your request. The school will then check to make sure the amount matches its estimated cost of attendance. It will also share any other financial aid you’ve received, such as federal student loans, scholarships or grants.

This certification process can actually be helpful, as it could prevent you from borrowing more than you need. Since you’ll have to pay back your loan with interest, it’s important not to borrow too much.

After the school confirms your loan amount, most lenders will send the funds directly to your financial aid office. If there’s money left over, it will be returned to you to use on books, housing, meal plans, transportation, medication, dependent care or other necessary expenses.

Although less common, some lenders will send the funds directly to you. In this case, it’s your job to pass on the money to your financial aid office to apply toward your tuition bill.

Either way, remember that you don’t have to keep excess loan money if you discover you borrowed too much. You’re likely better off returning that extra money to your lender to avoid paying interest on it.

Whatever expenses you can cover with savings, a part-time job or scholarships could help you avoid taking on a burdensome amount of student debt.

4. You have strong credit and income…

So far, the requirements for private student loans probably don’t seem that different from the requirements for federal ones. You have to be a student at an eligible school, and you must use your money on qualifying educational expenses.

But here’s where private lenders differ from most loans offered by the federal government: they require a credit check to take out a loan. In general, private lenders only approve creditworthy applicants who have a stable income.

This credit check reassures the lender that you have a history of paying back debt on time, as well as the means to do so. So when you submit a full application, you might be required to provide documentation, like pay stubs, monthly rent bills and bank account balances, as well as submitting to the credit check.

Of course, many undergraduate students don’t have strong credit yet, so they can’t qualify on their own. That’s where a cosigner comes in.

5. … Or you can apply with a cosigner

If you can’t qualify for a private student loan on your own, you can improve your chances by applying with a cosigner. You’ll need a cosigner with decent credit and a strong income to qualify for a private student loan.

According to data firm MeasureOne, more than 92% of private undergraduate loans were issued with a cosigner in the 2018-2019 school year. These student borrowers had a parent or another adult sharing their loan application and providing the required documentation — pay slips, bank statements, etc. — in their stead.

Before enlisting a cosigner to meet private student loan requirements, make sure you understand the significance of sharing debt. Your cosigner will be just as responsible for paying back the debt as you are, and their credit could be harmed in the event you can’t pay.

Make sure you and your cosigner have a discussion about expectations before taking on debt together. You should also look into options such as cosigner release or student loan refinancing if you ever want to take your cosigner’s name off the loan and assume full responsibility for the debt yourself.

Compare offers to find the best private student loan

Once you’ve prepared for private student loan requirements, your next step is shopping around for a loan. Fortunately, many lenders make it easy to compare offers online in just a few minutes.

With a pre-qualification check, you can enter a few basic pieces of information and see your loan offers with no impact on your credit score. If you see one you like, you can then go on to submit a full application.

This step is really useful, as it enables you to find a loan with the best rates. Let’s say, for example, you want to borrow $15,000 on a 10-year repayment plan. One lender offers a rate of 8.5%, which would cost you $7,317 in interest over 10 years. But after hunting around some more, you find a rate of 6.5%, which would only cost you $5,439 in interest over that same period — nearly $1900 in savings.

Taking the time to find the best rate could save you hundreds or even thousands of dollars over the life of your loan. So, along with learning about how to qualify for private student loans, make sure to compare offers from multiple lenders.

That way, you can earn your degree while feeling confident you’ve found the best deal for a private student loan.

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

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