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Updated on Monday, November 21, 2016
Kentucky’s student loan refinance program is operated by the Kentucky Higher Education Student Loan Corporation (KHESLC). Although the KHESLC primarily services Kentucky residents, this student loan refinance is open to residents of some other states, as well.
At present, there are over 40 million Americans repaying student loan debt. So it’s safe to say, finding the most efficient way to tackle student loan debt is at the top of many minds. Refinancing your student loans can get you a lower, fixed interest rate and consolidate multiple student loans into one easy payment.
Lenders like LendKey and SoFi have led the pack in student loan refinance products by offering some of the lowest rates around. More state-run student loan refinance programs are popping up as well to answer the call of borrowers who want to refinance their education debt for interest savings.
In this post we’ll cover:
- The KHESLC loan terms
- Eligibility requirements
- Student loans you can refinance
- Pros and cons
KHESLC loan terms
The KHESLC refinance offers fixed interest rates starting at 3.99% APR. KHESLC also offers a rate reduction of 0.50% if you make payments through auto-pay. Factoring in this discount, the lowest rate KHESLC will offer is 3.49% APR.
The loan terms are 10, 15, 20, or 25 years. The minimum amount you can refinance is $7,500.
The KHESLC refinance has no fees, including no prepayment penalty or origination fees.
This refinance is open to residents of Alabama, Georgia, Indiana, Kentucky, Mississippi, Missouri, Ohio, Tennessee, Virginia, and West Virginia.
To qualify, you must be employed for the past 12 consecutive months, and you need a credit score above 670.
A co-signer is not required unless you can’t meet income and credit requirements. However, applying with a co-signer even if you do qualify on your own can get you a lower interest rate.
Loans that you can refinance include private student loans, graduate or parent PLUS loans, Stafford Loans, and Perkins Loans. Students can refinance their loans together with parent PLUS loans. This means parents can add their parent PLUS loans to their children’s refinance to hand over the payment responsibility.
KHESLC borrower protections and benefits
The KHESLC is a private student loan refinance. Private student loans often come with limited benefits and protections to support borrowers in times of need. However, KHESLC is noteworthy in this area. For the interest rate, you can get a 0.50% rate reduction just for using auto-pay. That’s a nice perk.
Besides a competitive interest rate, KHESLC offers:
- Death and disability benefits
- Graduated payment plans
- Co-signer release
If you pass away or become permanently disabled before your loan is paid off, you and the co-signer can be released from the debt. If you’re a parent borrower and your child who benefited from the loan passes away before it’s paid off, you can also be released from the outstanding debt.
Besides the protections in tragic situations, the KHESLC refinance has a forbearance option. If you experience a period of hardship, you can request a temporary break from payments. You can get a maximum of 36 months in forbearance throughout the life of the loan term.
There’s also a graduated repayment plan that gives you a reduced payment at first and then increases the payment by 10% every two years. Before taking advantage of this perk, understand the implications of paying less up front. Paying less can lengthen your loan term and, ultimately, increase the cost of your loan.
Lastly, KHESLC allows for co-signer release. You can apply for co-signer release after you make 36 on-time, regularly scheduled payments on the loan. However, you will have to go through a credit review at the time of the release to confirm you meet eligibility criteria.
Should you refinance federal student loans?
We usually go through the typical federal student loan disclaimer when discussing refinances because understanding what you forfeit with a refinance is important.
In this case, KHESLC offers some borrower benefits and protections that can make the decision to leave your federal student loans behind less drastic.
Some major federal loan borrower benefits include forbearance, deferment, income-based payments, and loan forgiveness. Forbearance and deferment can put a pause on your student loan payments temporarily if you’re unable to pay due to economic hardship. KHESLC also offers this option.
Income-based payment plans cap your monthly payment based on your family size and income. If you’re in an entry-level job or underemployed, an income-based program can help make your monthly payments manageable.
Keep in mind, the same downside applies here as with the KHESLC graduated payment plan. Lower initial payments can stretch out your loan term. Although, for federal loan income-based plans, after making payments for 20 to 25 years any remaining student loan balance can be forgiven.
Lastly, Public Service Loan Forgiveness is a program that will forgive your federal student loans sooner than later. To qualify, you must make 120 monthly student loan payments while working in an approved public service position. It should take you around 10 years to get forgiveness. You may want to hold off on refinancing federal student loans if you’re considering public service.
You can compare what federal student loans have to offer against private student loans here.
Pros and cons
Pro: Low and fixed interest rates. The starting interest rate offered by the Kentucky refinance is as low as the student loan refinances offered by some of the most competitive lenders. We’ll talk about a few of these lenders below.
Con: Limited eligibility. This student loan refinance is only open to residents of 10 states. If you live outside of these states, unfortunately, you’re out of luck.
Pro: The borrower benefits and protections. Altogether for protections, there’s deferment, co-signer release, graduated payment, and the death and disability benefit. If you choose to refinance your federal loans with KHESLC, you can take comfort knowing there are still some backup protections in times of trouble.
Con: Forfeiting federal student loan perks. The KHESLC benefits are nice, but there are federal loan benefits like forgiveness that you would no longer have access to if you refinance.
Pro: The parent PLUS loan refinancing opportunity. Parents with parent PLUS loans can hand over the responsibility of payment to their children. Children can refinance parent PLUS loans together with their other loans using the Kentucky refinance.
Who will benefit from the KHESLC refinance?
Ultimately, borrowers who will benefit most from this refinance will be those who live in the 10 states where the refinance is offered. That’s a given. With location restrictions aside, the borrower benefits are impressive. The starting interest rate is impressive as well.
In fact, it’s right on target with other top student loan refinances available. The top 4 student loan refinances at this point are CommonBond, Earnest, LendKey, and SoFi because they offer the lowest interest rates.
Of course, the lowest rates offered by all lenders are given to those who are the most creditworthy. Applying with a co-signer will give you a better chance at qualifying for a low rate with KHESLC.
You can also take the time to strengthen your credit score before applying to obtain a competitive rate with KHESLC or any other lender. Be sure to shop around with multiple lenders when looking for a refinance to get the best deal.