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As graduation season approaches, you may notice more and more ads promoting student loan refinance. You may also receive offers from companies offering to lower your rate on your student loans. What does all of this mean to you? Learn what your options are and create the student loan repayment strategy that makes sense for you.

What is Refinancing?

Refinancing means using a new loan with better interest rates and/or terms to pay off an existing loan. Refinancing is commonly used with home mortgages, but can also be a great option for your student loans. Check out When to Consider Refinancing Student Loans for additional insight into potential reasons you might consider refinancing your student loans.

Who Can Benefit from Refinancing Student Loans?

If your goal is to obtain a lower interest rate and ultimately lower the total repayment costs of your loans, then refinancing is worth exploring. This is especially true if you have older private loans that may have a high interest rate, and you feel you may qualify for a lower interest rate now. Some consumers may also want to lower their overall monthly payment. They can achieve this from either a lower interest rate, or by extending the term (i.e., length of repayment) on their loan. Finally, if you have multiple loans with different lenders or servicers, refinancing combines your loans into one. This means you’ll only have to work with one entity for your student loans in the future.

What Types of Loans Can Be Refinanced?

Most companies that offer student loan refinancing allow you to include private loans and federal student loans when refinancing. (Private loans are loans made by a bank or other financial services provider you received to help fund your education. Federal loans (i.e., Direct Loans, Stafford Loans, Perkins Loans) are made by the government.) To qualify, your loans may need to be in their grace period or in repayment to be included in a refinance loan. That means you need to be out of school when you refinance those loans. You can include multiple loans from a number of different loan holders in one refinance loan. Make sure you know all of the student loans you have, and which company or organization is responsible for servicing those loans before refinancing.

Considerations and Cautions Before Refinancing

While refinancing might sound good to you, there are some things you need to consider.

  • Don’t just look at the low teaser rates. The lowest advertised rate is usually available to borrowers with the best credit scores who select the shortest repayment term. These options may not work for your situation.
  • Understand who will actually service your new refinance loan. In many instances, the lender you initially work with may not be the organization you make payments to, or rely on for customer service.
  • If you are considering including federal loans in your refinance, ensure the benefits outweigh any loss of protections or benefits only available with federal loans. For instance, if you include federal loans in a new private refinance loan, you lose access to income-driven repayment plans and the possibility for Public Service Loan Forgiveness that might be available with your federal loans.

The bottom line is, do your research and understand what course of action is best for you. Each person has unique circumstances and concerns, so refinancing may not always be best. You can learn more about refinance loans and other related articles by visiting U-fi.com.

Interested in student loan refinancing? Take the next step toward lower monthly payments.

Congratulations! You’re graduating soon and will be searching for your first job out of college. It’s an exciting time in your life. However, if you’re like the majority of college students, you’re also graduating with student loan debt. Now is a good time to make sure you’ve got a plan to manage your student loans after you graduate.

Here are some easy steps you can take to set yourself up to successfully manage your student loans.

First, Identify All of Your Student Loans

The best place to start is at the National Student Loan Data System (NSLDS). You can find information here about all of your federal loans. This will give you all the details you need to understand how much you’ve borrowed on your federal loans. You can also find out who to contact for questions about your federal student loans.

If you used private loans from a bank or other financial entity, check with your lender to make sure you have the correct loan information.

Next, Get an Idea of What Your Monthly Payments Will Look Like

At StudentLoans.gov you can access a repayment estimator for your federal loans that will give you an idea of what your monthly payment would look like under the different repayment plans available. Depending on your individual circumstances, it’s likely there is a plan that will work for you. If you have relatively low debt and a good salary, you may want to pay off your loans ASAP. The standard 10-year repayment term allows you the quickest and lowest cost method to pay off your loans.

If you have a higher debt load or lower income, there are options that base your student loan payment on your income. Income-driven repayment plans are often helpful since they give you a more affordable monthly payment based on your income. You can learn more about these options as well as how to apply them to your student loans at StudentLoans.gov.

For private loans, visit your lender’s website to access repayment calculators. Or, simply contact your private loan provider for additional information on what monthly repayment amount you can expect.

Know When Your First Payment is Due

With federal loans, you have the ability to postpone payments while you’re enrolled in school at least a half-time. This is also true of some private loans. That means you’ve probably not made any payments on your loans, or perhaps you’ve made some small payments to offset accruing interest. You are also given a grace period on your loans. The grace period is typically six months from your last day of school. The last day is usually considered when you graduate or have dropped below half-time enrollment. At the end of that grace period is when your first payment will be due. Make sure you know when that due date is. That will give you plenty of time to prepare and budget for that new payment.

Know Your Options if you Have Difficulty Making Payments and Need Assistance

There are a number of options for borrowers who encounter situations that make it difficult to manage their student loans. Your student loan servicer will work with you to find a solution, but you have to contact your servicer to get assistance. For example, if your income has changed dramatically you might want to change to an income driven repayment plan or adjust the plan you’re on based on your change in income. Additionally, if you return to school, to pursue a graduate degree for example, you can postpone (or defer) your student loans while you’re back in school. Don’t make the mistake of simply ignoring your student loan payments and damaging your credit score.

As you look forward to graduation and starting a new chapter in your life, just remember to do a little planning and research how to best manage your student loans and find the best repayment plan for your situation. And remember, your student loan servicer is there to help you if you have any questions.

If you borrowed student loans to help pay for college, you may not be required to make any payments until after you graduate or drop below half-time enrollment. That sounds like a pretty good deal; no payments and no worries while you focus on your studies. But remember, if you take out a federal Direct Unsubsidized Loan, a federal Direct PLUS Loan, or a private loan, interest accumulates during those months (or years) you’re in school and not making any payments. Here are some ways you can save on your student loans while you’re still in school.

Accruing Interest

Interest that accrues on your student loan will typically be capitalized when you begin repayment. That means any accrued interest during those months you are not making payments is added to the original principal amount of your loan. For instance, if you borrowed a $15,000 student loan with an interest rate of 6% as a freshman and made no payments for the four years you were in school, plus your grace period, 51 months would have passed. In this scenario, when you begin your repayment period, you would actually have a balance of $18,825 when you start repaying your loan 51 months later. That’s because $3,825 in interest (also known as capitalized interest) would have accrued during those 51 months and was added to your original loan amount.

In-School Payments Can Help

Now, let’s say you have a part-time job while you’re in school, working 15-20 hours a week to help with some of your expenses. If you could simply pay around $75 a month toward that $15,000 student loan, you could actually pay all the accruing interest (remember, that’s $3,825 total that would have been added to your loan when your first scheduled monthly payment is due). If you’re able to pay $75 towards your student loan’s accruing interest, the total cost you could ultimately save over the life of a 10-year repayment period would be nearly $1,300.

Example

Paying Interest While In School (No Capitalized Interest)Fully Deferred Payments While In School – No Payments (Capitalized Interest)
Original Loan Amount$15,000$15,000
Interest Accrued During In School and Grace Period (51 months)$3,825$3,825
Interest Paid During In-School and Grace Period$3,825$0
Loan Amount When Entering Repayment$15,000$18,825
Number of Months of Repayment120120
Monthly Payment$166.53$209
Total Interest Paid on Loan (including any payments during in school and grace period)$8,808.60$10,080
Total Paid on Student Loan (original loan amount plus interest)$23,808.60$25,080

As you can see from this example, making interest payments while you’re in school and during your grace period can help you save on your student loans down the road. Plus, making payments during your in-school and grace period also gets you in the habit of making payments on your student loan and better prepares you for successful repayment. Remember, this is just an example of borrowing one loan during your freshman year of college. Imagine what the capitalized interest could look like if you borrow each year of college, or what your savings would be by making continued interest payments while you’re in school. You can learn more ways to save on your student loans and get additional helpful information by visiting our student loan resources.

Taking out private student loans or refinancing current student loans is a popular option for students. When considering loans or loan refinance, many borrowers initially focus on either the interest rate of the loan or how much their monthly payments will be. This makes sense because they determine how much a borrower pays back over the life of a loan. However, the interest rate and expected monthly payments are determined by several factors. These factors include credit history, current financial situation, future earnings potential, lender costs and desired profit margin, and selected loan repayment options.

Let’s take a look at the repayment options available. Knowing your options can help you when deciding to take out a student loan or to refinance your existing loans.

Repayment Plans

When it comes to private student loans and student loan refinancing, lenders may offer more than one repayment plan. Below are the most common plans you will encounter:

Standard

Standard repayment is far and away the most common repayment plan for private student loans. In Standard repayment, your monthly payments are a set amount. That means you pay off your loan in equal installments over the remaining term of the loan.

Interest Only

With an Interest Only repayment plan, you begin making interest-only payments over a short period of time. Later, you revert to Standard repayment. With interest-only plans, you pay more in interest than with a Standard repayment plan.  Also, your monthly payments are higher than a Standard repayment plan when your loan reverts to full principal and interest payments.

Partial

With a Partial repayment plan, your initial payment amount is set for a period of time. It then reverts to Standard repayment for the remainder of the loan term. The total cost of a Partial repayment plan will also be higher than with a Standard repayment plan.

Deferred

Deferred repayment is when you start making payments at a specified time in the future. Most lenders let you defer payments while you are in school and for six months after you leave school. Deferred repayment is the most costly, since interest accrues while you are deferring your payments. That interest is then added to the principal balance of your loan before you enter your repayment period.

Graduated

While not very common for private student loans, Graduated repayment starts with lower monthly payments that increase over time. With Graduated repayment, you pay more for the loan than with Standard repayment. This is because interest accrues on a higher principal balance over a longer term.

Tip: When lenders offer a choice of repayment plans, they generally charge lower interest rates for Standard and Interest Only repayment. They charge a higher interest rate for Deferred repayment to compensate for the added risk. Choosing to make full principal and interest payments under a Standard repayment plan is the least costly repayment plan available. If you cannot afford to make full principal and interest payments, consider paying at least some amount each month. Whether you make interest-only payments or partial payments, it reduces your overall cost of borrowing.

By exploring your repayment plan options or considering loan refinance, you can find the best option for your financial situation. Whether you choose  In Part II of Choosing Your Private Student Loan Repayment Options, we’ll discuss interest rates and repayment terms. These also affect your total amount paid.

You may have heard about private student loans. Some information about private loans is like a Bigfoot sighting. There are a lot of stories, but they often aren’t based on facts. In this article, we’ll look at each private loan myth and give you the facts.

Private Loan Myth #1: Private Student Loans Only Offer Variable Interest Rates

One of the most common myths about private student loans is that they’re only available with riskier variable interest rates. In reality, most private loan providers offer borrowers a choice between a fixed interest rate and a variable interest rate. Depending on your individual circumstances, one may be more appealing than the other. Read more about choosing a variable or fixed interest rate to see what important factors should be considered when choosing your type of interest rate. Additionally, highly qualified borrowers can likely find private student loans with low interest rate options.

Private Loan Myth #2: Private Student Loans Have High Origination or Application Fees

The reality is that most private loan providers currently charge NO upfront fees, also known as origination or application fees. There is no fee to make extra payments or to pay off loans early. Although most loan providers offer loans with no upfront fees, research your options. Be sure to verify any fees or charges associated with loan products.

Private Loan Myth #3: Private Student Loans Require Immediate Repayment While You are Still in School

As a borrower, you have various repayment options offered by different private loan providers. Most lenders have an option to delay or postpone payments while enrolled at least half-time. They also offer a six-month grace period following your graduation or last date of at least half-time enrollment. This gives you the option to not make payments while enrolled in school as long as you are enrolled on at least a half-time basis. This can give you some added flexibility while you are focused on your studies. However, if you can make payments in school, even if only the accruing interest, you can save money and keep your loan costs lower. You can find additional ways to save money on your student loans here.

Private Loan Myth #4: Private Student Loans Have No Deferment or Forbearance Options if You Have Difficulty Making Payments

Most lenders offer options to postpone payments if you encounter some type of financial hardship. (You may want to check to be sure.) Most private loan lenders provide a hardship forbearance to temporarily postpone payments if you find it difficult to make payments.

Many private loan lenders also offer deferments. Deferments can postpone payments for certain circumstances. These circumstances include returning to school, having an internship or residency, or during other approved events. Again, check with your private loan lenders to see what options are specifically available.

Private Loan Myth #5: Federal Student Loans are Always Cheaper than Private Student Loans

As a general rule, explore your federal student loan options first before taking out any private loans. Federal student loans will typically provide you a greater degree of flexibility with repayment options and various forgiveness provisions. You can read a good overview of federal and private student loans here.

However, many private student loans can have interest rates as low as or even lower than federal student loans. Federal student loans also have a nominal origination fee charged to borrowers. As discussed earlier, most private loans do not have any origination or application fees. Several lenders now offer private loans designed specifically for parents for their students’ educational expenses. Parents find these loan options often have lower interest rates compared to federal Parent PLUS loans.

We hope you have a better understanding of private student loans and are better equipped to make informed decisions regarding your education financing options. Research your options to find what works best for your individual circumstances and don’t believe every myth you hear. But, if you happen to see Bigfoot in the cafeteria on campus, snap a pic. You just might be able to sell it and pay off your student loans!

Don’t let your student loan statement be a surprise in the mail. Be prepared for student loan repayment by asking yourself these three questions:

1. Who are your loan servicers?

When you take out student loans from the federal government, you will be assigned a student loan servicer by the U.S. Department of Education. If you have private student loans, the servicer will be assigned directly by the lender. Your student loan servicer is who you will work with to make payments on your student loans. They can also help you understand your student loan repayment options, and answer any other questions you may have. If you have multiple student loans, you may have multiple loan servicers. Visit nslds.ed.gov to look up your federal student loan servicers if you don’t know them. For private loans, contact your lender.

2. How much are your monthly payments and when are they due?

Now that you know who your loan servicers are and where to send payments, you need to know how much to send and when. For federal student loans, there’s generally a six-month grace period after graduation before your first student loan payment is due. By this point, your servicer already put together a student loan repayment schedule. This schedule shows you how much your monthly payments are.

You should receive a statement from your servicer three to four weeks before your payment is due. Make sure your servicer receives your payment by the due date. If you don’t make a loan payment by the due date, the loan is delinquent until you make a payment. Depending on your servicer or lender, this delinquency may be put on your credit report and negatively affect your credit score. Most servicers and lenders offer auto debit, meaning your monthly payment is taken directly from the account you specify on the due date. By doing this you can ensure your payments are never late. Some lenders even offer incentives, like interest rate reduction, for this type of payment.

3. What are my repayment options?

Your federal loans are automatically in a standard, 10-year repayment plan if you have not specified otherwise. If you find that the payments are more than you can afford, there are other options to explore. Federal student loans have several repayment options to help you repay your student loans. Call your student loan servicer and they will help you work through your options.

You can also consider refinancing or consolidating your student loans into one payment. If you have more than one servicer or lender, you will be making multiple payments every month. By consolidating or refinancing, you can make one monthly payment to one servicer. Consolidation will combine your federal student loans into a new loan so you have a single monthly payment. Refinancing can combine both your federal and private student loans into a new loan, with a new interest rate and term. Student loan consolidation and refinancing is not for everyone, so make sure you understand the pros and cons of each.

Following the basic steps outlined above will set you up for successful student loan repayment. Remember that your student loan servicer is there to help, so never hesitate to reach out if you have questions.