How to Find the Best Student Loan Refinancing Rates Fast

 

Read this if you’re ready to refinance your student loans and looking for the lowest interest rate.

Estimated read time < 5 minutes.

You’ve decided refinancing is right for you, congrats on taking back your financial power! With that new found dominion it’s time to start making the executive decisions needed to get the most out of your refinance.

First you’ll want to choose the borrower benefits you need so you’re only trusting your money with companies that give you the goods. Go back and read How to Choose the Refi Benefits You Need if you haven’t done this already.

The next step is to shop around for the best deal. You’re entering the world of competition for your loans. That means companies have to offer you the best to get your loan. Doesn’t it feel so good to be in control? So how do you start shopping around for the lowest interest rate without having a million credit checks? You use the rate estimators on the refinancing company website.

1. Go to the websites for all the refinancing companies you’re considering.

Here’s a handy list to get you started. Please note that some of these links are referral links which means we both get paid if you end up refinancing through the link.

2. Plug in your information.

  • How much debt you’re looking to refinance (most companies have a minimum of $15,000).
  • Your current monthly payment
  • Your estimated credit score or sometimes your social security number for a soft credit check
  • Your repayment term (5-20 years)
  • Your income and assets (savings, checking, and investments)
  • Other debts
  • Your email address and or phone number

3. Take a look at your rates.

  • You will get both variable and fixed interest rate estimates
  • You can also compare different interest rates across different loan terms

4.  Pick 2-3 companies with the best rate estimates and submit applications.

  • Once you’ve got rate estimates you can eliminate companies that aren’t offering competitive interest rates
  • Get ready to submit applications to the two or three companies with the lowest rate estimates

 

So how did it go? Did you find wildly varying rate estimates across companies? Who offered you the lowest rates? Comment below!

Five Benefits of Refinancing Your Student Loans

 

Read this if you’re considering refinancing your student loan debt.

Estimated read time ~5 minutes.

Student loan refinancing is all I’ve been talking about lately. Why? Refinancing your student loans is the easiest way to make your student loan payments go farther and it doesn’t require any sacrifice, other than a little time to explore your rates and submit applications. So why don’t more borrowers do it? Maybe people are afraid it’s a scam, maybe they’re worried about the impact on their credit score, maybe they’re worried about losing important federal benefits. Whatever the reasons for avoiding it, today’s review of the benefits of refinancing your student loans should give you a reason to consider refinancing.

 

You can save a ton of money

Depending on your current interest rate and your remaining loan balance you can save major money, we’re talking thousands to tens of thousands of dollars. Interest rates are starting to creep up right now but they’re still good for borrowers with good credit. The best rates go to those with good credit scores, generally >750 but the higher the better. The minimum required credit scores are generally around 680. You can potentially leverage the excellent credit of someone else by having them co-sign your loan to get a better rate, however this can detract from your personal sense of financial freedom.

By lowering your interest rate, refinancing enables you to get out of debt faster without having to sacrifice to make a higher payment.

 

You can get better customer service

The customer service of many federal loan servicers is terrible. Sometimes the customer service is not only terrible but potentially unethical. Such is the case with Navient who is being sued by the Consumer Finance Protection Bureau (CFPB) with allegations of mishandling payments and failing to direct borrowers to the best repayment plans. Most refinancing companies have far better customer service and are readily accessible via email or a quick phone call.

 

You can choose a more aggressive repayment term and monthly payment

Many refinancing companies offer terms as short as 5 years. If your goal is to aggressively repay your student loan debt and you can afford a 5 year term you can get better interest rates. Some borrowers like the shorter term and higher required monthly payment because it holds them accountable to an aggressive repayment schedule. However other borrowers prefer a longer term so they have lower required montly payments and more cushion in their budget. This gives them flexibility to allocate extra funds to student loans when able. Whichever approach you choose some companies, such as Earnest, offer flexible terms based on the specific monthly payment you select.

 

You can consolidate federal and private student loans

Having multiple individual student loans can be a lot to keep track of, all the different interest rates, multiple loan balances, making payments on different websites for federal vs private loans.. agh! If that seems chaotic, inefficient, or just plain annoying refinancing can eliminate it. When you refinance, all your refinanced loans become one single private loan with one interest rate and one loan servicer. A side note here, you may not want to refinance all your individual loans if some of your loans have a lower interest rate than the rate you will get when you refinance.

 

You can take charge of your debt by putting it on your terms

Have you noticed how much decision making power you get when you refinance? You choose your company, you choose your term, you choose your monthly payment. All of this contributes to a sense of power and ownership of your student loans. Rather than feeling like a helpless victim you get to feel like a financially savvy freedom fighter for your debt free dream. Your student loan debt is yours to tackle and refinancing is one the tools that puts some power back in your hands.

 

Refinancing has a lot of benefits for the right borrowers. If you’re not sure if refinancing is right for you check out Is Refinancing Right for You? to get started. Prefer to watch? Check out Repayable on YouTube.

Additional Resources

The Top Four Refinancing Companies

How to Choose the Refinancing Benefits You Need

Get The Refinancing Master List a complete resource of refinancing companies as soon as it’s available.

The Top Student Loan Refinancing Companies

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Read this article if you’re considering refinancing your student loans and aren’t sure which company to choose.

Estimated read time ~ 15 minutes.

Student loan refinancing, it’s something to consider if you’re looking to repay your loans quickly while minimizing interest. But there are so many questions to be answered. So I asked the questions for you and came up with my top four re-fi companies.

If you want the complete list sign-up here and I will email you the Refinancing Master List as soon as it’s ready. The Master List gives you the details for eleven of the most popular companies so you can find the best refinancing company for you. Fair warning this is an e-mail opt-in. I need your email address so I can get you the Master List when it’s finished and I won’t spam you to death or push for you to buy anything. I think if you’re careful enough to look at all the available options then we’re on the same wavelength and we should keep in touch!

How did I choose the top four refinancing companies from the eleven I contacted?

First I took into account their response time and quality of response to my questions. This is a direct marker of customer service. If you want crappy customer service you can stay with your current loan servicer and get the runaround all day long. A refinancing company should have excellent customer service. If they don’t, there’s always another company offering a good rate with better service.

Next, I looked at the benefits offered to borrowers including whether or not loan amounts were forgiven if borrowers died. Loan forgiveness upon death is important if you don’t have enough life insurance to cover your end of life expenses and your student loan debt. Federal loans carry significant benefits for borrowers so it’s important to know what you’re losing if you refinance. With the best companies you don’t lose much.

The last thing I considered was payment flexibility. I wanted to know what a borrower could expect if their income situation changed and they needed to alter their monthly payment. Federal loans offer incredible flexibility in monthly payments and the best refinancing companies can offer similar flexibility.

What questions did I ask of all the refinancing companies and how did they do?

I asked each company the exact same set of twelve questions. Below you’ll find their paraphrased responses and my summary of the three most important considerations, customer service, borrower benefits, and payment flexibility.

4. Laurel Road (Formerly DRB)

 

Will your company sell my loan to another company?

Laurel Road uses MOHELA as their loan servicer, however the loan is still owned by DRB.

How does your company protect my financial information and identity?

Laurel Road maintains physical, electronic and procedural safeguards that comply with federal standards to protect customer information, and continually evaluate new technology to improve those safeguards.

What borrower benefits does your company offer?

A 0.25% interest reduction is offered for automatic payments.

What happens to my loan if I die?

Laurel Road will forgive all of the amounts owed under the loan if the borrower dies, and some or all of the amounts owed under the loan if the borrower demonstrates to Laurel Road’s satisfaction a significant unanticipated permanent reduction in the borrower’s income due to permanent disability. Laurel Road began offering this forgiveness benefit in the spring of 2015 and only loans originated after that point are eligible for it. If you are a current Laurel Road borrower and are not sure if you are eligible for this benefit, please refer to your promissory note or contact Laurel Road.

Are there any application fees or fees for early repayment?

There are no application fees and no penalties for pre-payment.

How are extra payments allocated? I.e. are they allocated to principal only or to principal and interest?

Payments are allocated first to any fees, then interest, then to principal.

How flexible is your company with payment adjustments? What happens if I need to adjust my monthly payment?

Payments are pre-determined on borrowers final documents and are not adjustable.

If market interest rates change or my income increases am I able to re-finance through your company again for a better rate? If so what are the requirements and how does that work? Is there a fee for re-refinancing?

There is no fee for refinancing, and borrowers can refinance a Laurel Road refinanced student loan at any time. The requirements for refinancing a current Laurel Road loan are the same as all applications. Any documents that are not expired or time sensitive can be used for the new application.

Repayable’s play-by-play.

Laurel Road (formerly DRB) has been offering student loan refinancing since 2006. The customer service at Laurel Road responded within the hour to my email (55 min). Both the speed of response and quality of response were excellent. Their customer service clearly answered 11/12 questions the first time with no additional follow-up needed.

Laurel Road forgives your loan amount in the event of borrower death and loan amounts can be forgiven in the event of permanent disability. This is nearly identical to the benefit offered to federal loan borrowers.

When it comes to payment flexibility Laurel Road functions more like a traditional bank loan. Borrowers monthly payments are set out in the loan terms and aren’t adjustable. If you’re in a stable job and confident in your ability to maintain your payments at or above the minimum monthly minimum payment this is not a significant drawback.

Repayable’s overall assessment.

Laurel Road is a good option for someone looking for company that has been established for awhile and should be in the running for your consideration unless you need maximum payment flexibility.

3. Rhode Island Student Loan Authority (RISLA)

 

Will your company sell my loan to another company?

Loans would only be transferred if your loan were to default and had to be send to a collection agency or lawyer.

How does your company protect my financial information and identity?

Information is not shared with any outside company.

What borrower benefits does your company offer?

A 0.25% interest reduction is offered for automatic payments.

What happens to my loan if I die?

There is death and permanent disability benefit on a refinanced loan.

Are there any application fees or fees for early repayment?

There are no application fees and no penalties for pre-payment.

How are extra payments allocated? I.e. are they allocated to principal only or to principal and interest?

Any amount you pay more than the minimum monthly payment goes to principal and pays the balance sooner.

How flexible is your company with payment adjustments? What happens if I need to adjust my monthly payment?

RISLA has an option for income-based repayment if your income (and that of your cosigner if you have one) drops significantly in the future.

If market interest rates change or my income increases am I able to re-finance through your company again for a better rate? If so what are the requirements and how does that work? Is there a fee for re-refinancing?

You can re-finance a refinanced loan for a better rate.  The application is the same as the previous loan and there is not a fee.

Repayable’s play-by-play.

RISLA is a non-profit that’s been offering student loan funding (in the form of student loans or re-financed loans) since 1981. The customer service at RISLA was the fastest with a response time of 20 minutes (woah!). While the speed of response is excellent the quality of response is quite good too. Their customer service clearly answered 10/12 questions the first time with no additional follow-up needed.

RISLA forgives your loan amount in the event of borrower death and loan amounts can be forgiven in the event of permanent disability. This is nearly identical to the benefit offered to federal loan borrowers.

When it comes to payment flexibility RISLA leaves a little to be desired compared to the top two companies. If you’re in a stable job and confident in your ability to maintain your payments at or above the minimum monthly minimum payment this is not a significant drawback. However, RISLA does offer the option of income-based payments if your income significantly changes so there is some flexibility for you.

Repayable’s overall assessment.

RISLA is a good option for someone looking for company that has been established for awhile and should be in the running for your consideration unless you need maximum payment flexibility.

2. SoFi

 

Will your company sell my loan to another company?

Loans refinanced through SoFi are labeled through SoFi.

How does your company protect my financial information and identity?

Everything done online is secure and protected.

What borrower benefits does your company offer?

SoFi members have access to career coaching, unemployment protection, member events, and an auto-pay discount of 0.25% if signed up for automatic payments.

What happens to my loan if I die?

If you die your power of attorney needs to upload a death certificate and the loan is forgiven.

Are there any application fees or fees for early repayment?

There are no application or origination fees, and no prepayment penalties.

How are extra payments allocated? I.e. are they allocated to principal only or to principal and interest?

Extra payments are applied to accrued interest first and then principal.

How flexible is your company with payment adjustments? What happens if I need to adjust my monthly payment?

If you experience unexpected unemployment SoFi offers a pause in monthly loan payments.

If market interest rates change or my income increases am I able to re-finance through your company again for a better rate? If so what are the requirements and how does that work? Is there a fee for re-refinancing?

You can re-finance your loan as many times as you would like to. You will need to fill out another application and there is no fee.

Repayable’s play-by-play.

SoFi is a refinancing company started by four Stanford graduates in 2011. The customer service at SoFi was the slowest to reply with a response time of around 24 hours. Unfortunately the customer service was also not the best quality. They answered 7/12 questions the first time and two of those answers needed additional follow-up on my part to clarify.

SoFi forgives your loan amount in the event of borrower death after a borrowers power of attorney uploads a death certificate. That means borrowers don’t need to carry enough life insurance to repay their outstanding loan balance.

SoFi has many options for payment flexibility. SoFi can pause payments if a borrower experiences unemployment. SoFi also offers up to six months of loan deferment for entrepreneurs. The entrepreneurial program is unique to SoFi. At the time of refinancing SoFi also offers multiple term and monthly payment options.

Repayable’s overall assessment.

SoFi is a good choice for any entrepreneur looking for a refinancing company and for anyone looking for a little payment flexibility. SoFi offers slightly more repayment flexibility than RISLA gaining them the number two spot. However, SoFi’s customer service took longer to respond and provided lower quality responses than the other top companies.

1. Earnest

 

Will your company sell my loan to another company?

Earnest will service your loan for the life of the loan.

How does your company protect my financial information and identity?

Earnest has extensive security and privacy systems in place. You can review the details of this system here.

What borrower benefits does your company offer?

Borrower benefits include the ability to tailor your exact minimum monthly payment, increase payment to pay off loan faster, save on interest with optional bi-weekly payments, make extra or early payments without fees,  skip a payment and make it up later, consolidate your private and federal loans, forbearance in certain circumstances (see more info here).

What happens to my loan if I die?

Earnest will forgive your loans fully.

Are there any application fees or fees for early repayment?

Earnest charges no fees of any kind.

How are extra payments allocated? I.e. are they allocated to principal only or to principal and interest?

In accordance with state law, all payments (including early and extra payments) are processed first to any interest that has accrued since the last payment. Earnest calculates interest at a simple daily rate. After the payment has been applied to the interest accrued, the remaining balance of the payment goes toward the principal balance of your loan.

How flexible is your company with payment adjustments? What happens if I need to adjust my monthly payment?

In case of financial hardship due to involuntary loss of employment, Earnest will work with you and provide either reduced monthly payment amount or suspend your monthly payment for a determined amount of time. Earnest has the most flexible payment selection of all the refinancing companies when you originally apply. They have a slider tool that calculates the interest rate and term as you adjust the amount of your monthly payment. They also give you the ability to increase your monthly payments or choose bi-weekly payments.

If market interest rates change or my income increases am I able to re-finance through your company again for a better rate? If so what are the requirements and how does that work? Is there a fee for re-refinancing?

Once you’ve made at least six months of on-time payments on your Earnest loan, you’ll be eligible to apply to refinance your Earnest student loan again. You will have to submit a new application. Your employment, income, assets and debt levels will be considered again before you receive a new loan offer. Market rates apply. No fees involved.

Repayable’s play-by-play.

Earnest is the new kid on the block and was founded in 2013.  Their customer service responded quickly at 50 minutes and also gave the best quality and most thorough responses. They answered 12/12 questions the first time and none of their responses required follow-up clarification.

Earnest forgives your loan amount fully in the event of borrower death. That means borrowers don’t need to carry enough life insurance to repay their outstanding loan balance.

Earnest has the highest amount of payment flexibility of the refinancing companies. The unique slider function at the time of refinancing allows you to see the impact of different monthly payments on your interest rate and loan term. Earnest also offers reduced or temporarily suspended monthly payments if the borrower experiences job loss. Additionally Earnest offers the opportunity to make bi-weekly payments so you can minimize the amount of interest you pay.

Repayable’s overall assessment.

Earnest earned the top spot in all three of the major criteria used to assess refinancing companies. Earnest had the highest quality and prompt customer service, forgives student loans in the event of borrower death, and has the most payment flexibility. Earnest is a good choice for all borrowers considering refinancing.

Looking for More?

If you want the complete list sign-up here and I will email you the Refinancing Master List as soon as it’s ready. The Master List gives you the details for eleven of the most popular companies so you can find the best refinancing company for you. Fair warning this is an e-mail opt-in. I need your email address so I can get you the Master List when it’s finished. Don’t worry I won’t spam you to death or push a 5-step course on you. I think if you’re careful enough to look at all the available options then we’re on the same wavelength and we should keep in touch!

A Note about Referral Links

Some of the links in this article (right now Earnest and SoFi) are referral links. That means if you refinance with either of these companies we both get paid. With Earnest we both get $200 and with SoFi you get $100 and I get $300. I don’t rank any refinancing companies based on their referral fees or lack of them. I use the criteria described at the beginning of this post to provide you the transparent information used to rank these companies.

Is Student Loan Refinancing Right For You?


Photo Credit: Rachael Gorjestani

Read this if you’re considering refinancing your student loans. Estimated read time ~5 minutes.

If you have student loan debt you may have heard whispers about refinancing for a lower interest rate. But you might be wondering if that’s legit, it definitely sounds like a scam. Essentially you give all your income and debt information to a company in the form of a loan application and they approve you and offer you a reduced interest rate. What’s in it for them? Interest on a $1.4 trillion market.

So how do you decide if refinancing your student loans is a smart financial move for you? Read on for straightforward questions and answers to help you decide.

How Predictable is Your Income?

Federal student loans have by far, the most flexible monthly payments. They’re designed to meet the needs of young borrowers inexperienced with debt and landing entry-level positions that may not pay incredibly well. While some refinancing companies offer monthly payment flexibility and the possibility for deferment, many refinancing companies don’t. Borrowers with predictable income are better suited to refinancing.

How Good is Your Credit?

Many student loan companies require minimum credit scores of 660-680. The better your credit score, the better your interest rate. Even if you use a company like Earnest who doesn’t have a minimum required score, a low score may not actually snag you a better interest rate than you currently have. Refinancing is best suite to borrowers with good to excellent credit scores but is worth looking into even if your score is lacking.

Do You Have Federal and Private Loans?

Student loan refinancing allows you to pick and choose the loans you refinance and consolidate them all into one loan. It’s important to note that if you have some loans at a better interest rate than your refinanced rate you can keep those with your current servicer and refinance only the higher interest rate loans. If you’re looking to simplify many loans with different interest rates into one loan with one interest rate, refinancing is a good fit.

How Quickly Do You Want to Repay?

Student loan refinancing shouldn’t be used to extend the term of your loan repayment. Many companies offer terms from 5-15 years. The goal of refinancing is to pay less interest. If you extend your loan term you could wind up paying more. The speed with which you intend to repay your loans can help you decide if a fixed or variable interest rate is right for you. Fixed rates tend to appeal more to those who plan to take awhile to repay and lower starting variable rates appeal to those who want to repay quickly.

What are Your Other Financial Goals?

Less interest = more bang for your buck. You’ll be out of student loan debt faster making the same monthly payment. Do you want to buy a home, max out your 401K contributions, max out your IRA, make additional investments, start a side hustle, drop down to part time at work, change careers, travel? Refinancing will help you get out of student loan debt faster so you can go all in on these goals guilt-free. However, some borrowers don’t want to delay these financial goals and may want more of their money right now. If that’s you, you may not be the right candidate for refinancing.

Will refinancing get you to your debt free dream? Is there a category that you struggle with? Let me know in the comments below or on the Repayable Facebook Page. You can always send me an email jeni@repayable.org with any questions you have about whether refinancing is right for you or not.

How to Choose the Student Loan Refinancing Benefits You Need

Read this article if you’re looking to refinance your student loans but aren’t sure which borrower benefits you actually need.

Estimated read time 10 minutes.

Refinancing your student loans can slash your interest rates and save you thousands and even tens of thousands of dollars in interest. For those who qualify it’s a no-brainer. You can keep making the same monthly payment and see each payment get you closer to your debt free dream. There are a multitude of student loan refinancing companies out there. So how do you decide which company best suits your repayment style? This article will discuss the various borrower benefits offered by refinancing companies and describe the folks who need them.

Loan Forgiveness Upon Death

This is a borrower benefit attached to all federal student loans. Essentially if the borrower dies the remaining loan balance is forgiven. That means no one can go after your estate or living family members to get the money to repay the balance. Some refinancing companies offer this benefit while others will collect the money from your co-signers or estate. Most refinancing companies have insurance and will go to their insurance rather than dragging the money out of your living relatives.

Do you need to refinance with a company that offers loan forgiveness in the event of borrower death?

If you don’t carry enough life insurance to cover the cost of your funeral and end of life expenses (other debts) plus the cost of your student loan debt you should choose a company that offers the benefit of loan forgiveness upon borrower death. If something tragic were to happen to you it would make an awful situation worse by leaving your family to repay your debt.

Companies that offer loan forgiveness upon borrower death are: Earnest, DRB, RISLA, CollegeAve, SoFi, EdvestinU, and Citizens Bank.

Companies that don’t offer loan forgiveness upon borrower death or offer restricted loan forgiveness upon borrower death are ELFI, CommonBond, iHELP, and LendKey.

Flexible Monthly Payments

Federal loans carry many different repayment plan options. This gives borrowers maximal flexibility to adjust their payments to their financial situation. When refinancing student loans repayment plans are eliminated and you are left with the monthly payment and term of your loan as decided in your contract. Some refinancing companies offer the opportunity to reassess your monthly payment and change it if needed while others remain rigid and adhere to the terms of your loan.

Do you need to worry about the flexibility of your monthly student loan payment?

If you have unpredictable income you may be better off choosing a company that offers more flexibility. It should also be noted that unpredictable income is a reason to consider keeping federal loans instead of refinancing because federal loans offer the most gracious repayment plans and periods of forbearance for financial hardship.

Companies that offer the option to change your monthly payment are: RISLA, Earnest, and iHELP.

Periods of Deferment and Forbearance

Deferment is pausing monthly payments generally without the accrual of interest while forbearance is the ability to pause monthly payments while interest accrues. Generally when refinancing companies offer the ability to pause payments interest continues to accrue on the loan. Education related forbearance and deferment are attached to all federal loans. That means if you enroll at least half-time you’re able to pause payments on your student loans (interest accrues on unsubsidized loans).

Do you need to worry about being able to pause your monthly payments?

If you’re considering returning to school in a way that decreases your monthly income (i.e you stop working or drop down to part time) you need to be sure to refinance with a company that offers this benefit. It will come at a cost as interest will accrue in most cases throughout the period of paused payments.

Companies that offer the ability to pause payments for education are: Earnest, SoFi, CommonBond, Citizens Bank,

Companies that offer the ability to pause payments in the case of financial hardship are: Earnest, SoFi, CommonBond,iHELP, EdvestinU, Citizens Bank

What are the benefits you’ve got to have in order to refinance your student loans? Let me know in the comments below or on the Repayable Facebook page.

Additional resources

My $7,000 Student Loan Mistake

Student Loan Refinancing: A Millennial’s Guide to Earnest

How to Refinance if You’re a Pharmacy Resident

Eight Questions to Ask Student Loan Refinancing Companies

A note about the links to refinancing companies.

The links to the refinancing companies in this article are affiliate links. That means if you follow this link and choose to refinance your loan we will both get money. I want you to choose the company that makes the most sense for you and gives you the best interest rate while also meeting your benefit needs as a borrower.

 

Repayable’s Road Map to Understanding Your Student Loans

Start here if you’re just starting to figure out your student loans. It’s the road map for student loan debt. Follow the map and you will end up with a strategy for repayable student loans. Estimated read time ~10 minutes.

Find out how much student loan debt you have.

The very first step in finding a way to make your student loan debt repayable is to figure out exactly how much you owe. You may have a sense of how much you owe i.e. around $40,000. But the key to obtaining freedom from debt is to know your debt well, which means knowing the exact amount you owe. There’s a big difference between about $40,000 and $43,700.

You can find your total debt by logging in to the website of your loan servicer(s) and looking at your total loan amount. If you have multiple servicers, add the individual loan amounts together.

Start by reading the post How to Figure out How Much Student Loan Debt You Have.

Find out if you have federal or private student loans.

Federal and private loans may have different strategies for repayment so it’s important to know which type of loans you have.

The post How to Figure out if You Have Federal or Private Student Loans gives you a detailed how-to.

Determine when you have to start repaying your loans.

If you’re not already in repayment, you next step is to figure out when you’ll need to start repaying your loans. Federal loan repayment typically begins six months after graduation for Direct and Stafford loans but can differ for Perkins and Plus loans. Private loan repayment grace periods vary by lender so you’ll need to contact your private lender to figure out exactly when you’ll need to begin repayment.

Determine your repayment plan.

Your repayment plan dictates your financial approach to student loans. Be sure you’re in a plan that matches your desired approach to loan repayment. Read the posts How to Figure Out Your Repayment Plan for a step-by-step guide and Should You Break Up With Your Student Loan Repayment Plan? to get a sense of the key tenants of repayment plans so you can pick the best one.

Look at your interest rates.

When you go to your loan servicer’s website and look at your total loan amounts your interest rate for each loan should be listed next to the loan amount. Your interest rate helps you decide where to allocate extra payments (higher interest loans should generally be your first target all else equal).

Determine your financial state of affairs using debt:income ratio.

Are your student loans a financial nightmare? Are they really? The media will tell you yes, old school graduates will tell you it’s your own fault, so where is the truth? The truth lies in a simple mathematical tool called debt:income ratio. Find out how to calculate it (swear to god you only need basic arithmetic) and what it tells you by reading How Bad is Your Student Loan Debt? A Simple Answer.

Avoid Default

If things aren’t looking so rosy for you on the student loan debt front don’t worry, there are options. Check out Don’t Default on Student Loans: Do This Instead and Student Loan Repayment Panic? Let’s Talk About Deferment and Forbearance.

Decide your next steps.

After you gain an understanding of your student loans you may realize your best option isn’t just optimizing your repayment plan.  If you think your best options is refinancing or loan forgiveness you can learn more about those topics by checking out the refinancing posts on the blog or loan forgiveness posts on the blog or by watching videos on the Repayable YouTube channel. The guides for refinancing and loan forgiveness are coming soon.

Additional Resources:

Federal Student Aid Understanding Repayment

Nerd Wallet Understanding Student Loans

Accessing your Student Loan Information Through NSLDS FAQ

A Description of Federal Loans

Federal vs Private Student Loans

Federal Student Aid Guide to Repaying Federal Loans

Federal Student Aid Overview of Income-driven Repayment 

Federal Student Aid Overview of Repayment Plans

Student Loan Repayment Panic? Let’s Talk about Deferment and Forbearance

Student Loan Repayment Panic? Let’s Talk about Deferment and Forbearance

Read this if you’re panicking about making student loan payments and you are looking for temporary relief from student loan debt payments.

Estimated read time ~5 minutes.

Student loan deferment or forbearance can give you temporary relief from the financial stress of student loan payments. Here’s what you need to know to decide if these options are right for you.  

Deferment

Deferment allows you to temporarily stop making payments on your student loans. While in deferment the federal government pays the interest accruing on your subsidized federal loans. That means you don’t earn interest or compounding interest on those loans during your period of deferment.

In order to be eligible for deferment borrowers must meet specific criteria. You can find the comprehensive list and forms for each type of deferment here. In a nutshell you’re eligible if you’re still enrolled in school half-time, if you’re in grad school or fellowship, if you’re unemployed, if you’re experiencing economic hardship or in the peace corps, if you’re currently or were recently on active military duty for war, military operation, or national emergency.

Deferment is the ideal choice because you will never have to pay for interest accrued on subsidized loans during the period of your deferment. You can find the

Forbearance

Forbearance allows you to temporarily stop making payments on your student loans. While in forbearance interest continues to accrue and compound on all types of loans including subsidized.

There are two types of forbearance, general and mandatory. Forbearances aren’t granted for longer than 12 months so if you are still experiencing hardship or are eligible for mandatory forbearance after that you will need to re-request forbearance.

General forbearance is at the discretion of your loan servicer and can be granted for reasons such as financial difficulty, medical expenses, employer change, and other reasons suitable to your lender.

Mandatory forbearance is required to be granted by your loan servicer if you meet eligibility requirements. These requirements can be medical or other health-professional residency, total monthly amount of student loan payment is 20% or more of your gross monthly income, some teaching and americorps positions, some military and national guard situations

You can find the general forbearance request here.

Alternative repayment plans.

Do you really need to stop making payments on your student loans or is there other room in your budget to make sacrifices? Take a calm look at your finances and find out if a lower payment is really what you need rather than no payment. You can accrue a significant amount of interest in forbearance. Let’s look at 12 months forbearance on a $36,000 loan with 4.8% interest. Your loan balance after 12 months forbearance will be $37,728. That’s an extra $1,728 you now owe and 4.8% relative increase in the cost of your education. Choose wisely, income-based payments also allow you to work toward eventual loan forgiveness after 20-25 years of payments.

Let me know what your biggest fears are about student loan repayment in the comments below, on the Repayable Facebook Page, or by sending me an email jeni@repayable.org. I’m here to help. With the information you need, you can make your student loans truly repayable.

Additional Resources:

Deferment and Forbearance 

Deferment Eligibility 

Forbearance Request Form

Don’t Default On Your Student Loans: Do This Instead

Don’t Default On Your Student Loans: Do This Instead

Read this article if you’re worried about being able to afford student loan payments and think you  might default. Estimated read time ~10 minutes.

If you’ve come to this article you might be uncertain of your financial future. Maybe you can’t find a job, maybe you had unexpected medical expenses, or maybe you overextended yourself when borrowing for college and now are facing down repayment. Whatever brings you to this article take a deep breath, you have options.

Repayable is all about finding the best way for you to repay your student loans. That starts with keeping you in good standing, which means making your payments on time. Your student loans are in default when you’ve failed to make a payment for 270 days if you pay monthly, or 330 days for FFEL loan programs.

Step 1: Contact Your Loan Servicer

The first thing to do is contact your loan servicer to discuss your options. Your loan servicer can help you find the payment plan that makes the most sense for you.

Step 2: Review Your Options

There are a two strategies to help you manage your student loan debt during times of financial hardship. Deferment and forbearance allow you to delay making payments for a period of time. In deferment you don’t make any monthly payments and you don’t accumulate interest on subsidized loans. In forbearance you don’t make any monthly payments but you do accumulate interest on all loans.

The next strategy involves choosing an income-driven repayment plan. Income-driven repayment plans include: Revised Pay as You Earn (REPAYE), Pay as You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). Each plan is slightly different but involve paying 10-20% of your discretionary income and forgiveness of the remaining balance after 20-25 years. Your monthly payment can be very low so may be a better option than deferment or forbearance because you can work toward loan forgiveness.

Step 3: Choose the Strategy That’s Best For You

Picking the strategy that’s best for you isn’t as overwhelming as you might think. You may even be able to enlist the help of the financial aid office of your college.

Step 4: Avoid Common Pitfalls

Don’t be so overwhelmed that you choose to ignore the problem until you’re in default. Default can keep you from loan forgiveness eligibility and ruin your credit. If your student loans aren’t in good standing you could also lose the professional license you earned with your college degree.

Don’t enroll half-time to avoid having to make payments. Your debt is compounding but you might not be earning yourself a higher paying job after the completion of the courses. You’re better off seeking deferment or forbearance or switching to an income-driven repayment plan.

Unlike other types of consumer debt, student loan debt can’t be discharged in bankruptcy. You will have to deal with your student loans one way or another. The easiest way to do that is to start looking at your options at the first sign of trouble. Don’t let your fear of criticism or the unknown keep you from repaying your student loans

What’s your biggest struggle with repayment? Let me know in the comments below or on the Repayable Facebook Page. You can always send me an email jeni@repayable.org and I’ll help you out!

Additional Resources:

Understanding Default 

Deferment and Forbearance 

Avoiding Default 

Income-Driven Plans

How Bad is Your Student Loan Debt? A Simple Answer

How Bad is Your Student Loan Debt? A Simple Answer

Read this article if you know your total debt load and want to figure out how bad it actually is.

Estimated read time ~ 9 minutes.

By now you’ve figured out how much you owe, what type of loans you have, and what repayment plan you’re in. Now it’s time to assess your financial situation. You have to draw conclusions about the impact your student loans have on your finances in order to set goals that meet your unique needs.

So how do you know if your student loan debt sucks hard or just sucks a little? The answer is the debt to income (debt:income) ratio. This handy little ratio helps quantify your debt load relative to your income. Think of it this way, $40,000 feels different if you make $28,000 per year than if you make $100,000 per year. 

A side note that the debt:income ratio I talk about is not the same as the debt:income ratio creditors use to determine your financial viability. This ratio focuses on total student loan debt load and annual income. The common debt:income ratio focuses on monthly debt payments and monthly income and is reported as a percentage.

How to calculate your debt:income ratio.

  1. Grab your total debt: we’ll use $40,000 for this example.
  2. Estimate your total annual income: we’ll use $28,000 for this example.
  3. Divide your debt by your annual income: $40,000 ➗ 28,000
  4. Your quotient is your debt:income: in this case it’s about 1.4

What does your debt:income ratio mean?

Your debt:income gives you a quick way to assess the affordability of your debt. In general the higher your debt:income the harder it feels to repay your debt. As you make more money it feels easier to repay your debt with the same or even higher debt:income.

For example if your student loan debt is $150,000 and you make $100,000 per year it’s easier to make your payments than if you have a debt total of $45,000 and make $30,000 per year. Why is this the case? Essentially the more money you make, the more you have left after paying for basic costs of living. You may elect to pay for a higher quality of life as you make more but there’s less financial pressure on the basics like groceries, transportation, and health insurance.

What’s a good debt:income ratio?

The answer is, it depends on how much you make. If your ratio is less than 1:1 it will likely feel affordable. However if you make a salary that’s high enough to cover cost of living and then some a ratio of 1.5:1 may feel affordable. Generally, I would aim to cap your debt:income ratio at 1.5:1.

What to do with your debt:income ratio.

So what do you do if your debt:income ratio just isn’t that great? Well, there are only two sides to this equation, your debt and your income. The only thing you can do with your debt once you’ve borrowed it is repay it. The flexible side of this equation is your income.

There are a ton of resources out there on ways to make extra money. You can try to move to a better paying position in your company, switch to a better paying field (that doesn’t require more education and debt), ask for a raise, or start a side hustle. There are a lot of resources out there for making any of these moves. I’ll link up my favorite side hustle podcast at the end of this post.

What did your debt:income ratio reveal to you? Did it bring up more questions than answers? I would love to hear your thoughts on the Repayable Facebook Page or in the comments below. As always you can send an email to me jeni@repayable.org.

Additional Resources

Side Hustle School Podcast

Should You Break Up With Your Student Loan Repayment Plan?

Should You Break Up With Your Student Loan Repayment Plan?

Read this if you want to know if you’re in the best repayment plan for your specific financial situation. Estimated read time ~5 minutes.

Repayment plans are the start of your student loan repayment journey. The right plan keeps you from worrying you won’t be able to make your monthly payment and sets an end date for student loan freedom. The wrong plan has you financially stretched or paying more slowly than you could be.

This article will give you the key tenants of choosing a repayment plan so you can customize your repayment to fit your financial needs. If your plan’s not doing it for you anymore it’s time to say buh-bye!

Duration of Repayment

How long will it take you to repay your loans according to this plan with no missed or extra payments? The plan you choose determines when you’re debt free. If you want to be out of student loan debt in 10 years look at the standard 10 year repayment plan.

Cost of Monthly Payment Relative to Your Income

Repayment plans offer either a fixed monthly amount with a set duration or a variable amount that gets re-calculated with changes in your income. The income-based repayment plans offer the most flexibility in terms of your payment relative to your income. However a standard 10 year plan offers a clearly defined timeline for repayment.

Your financial situation will determine which option is best for you at the time. For example maybe you would like to be out of debt in 10 years but the monthly payment under the 10 year repayment plan is unaffordable right now on your starter salary. You can always choose an income-based plan first and change to a more aggressive repayment plan as your income allows.

Loan Forgiveness Options

Are payments made under this repayment plan eligible for loan forgiveness? This is a critical piece of information to know if you’re considering loan forgiveness of any type. If you’re working toward loan forgiveness such as PSLF you’re required to make 120 payments on an eligible income-based repayment plan. If you change plans or consolidate your loans you could have to restart your 120 payments from the beginning and lose all the progress you made so far.

Advantages and Disadvantages of the Repayment Plan

What are the advantages and disadvantages of your repayment plan? Standard repayment plans minimize the amount you pay in interest and help you repay your loans more quickly but have high monthly payments that don’t take your income into account so may be unaffordable for some borrowers. Income-based plans have low monthly payments but stretch out the time it takes to repay your loans which means you pay more interest and it will take you longer to become debt free.

Target Borrower for the Repayment Plan

Who is the ideal candidate for your repayment plan? Some plans work very well for high-income borrowers and less well for lower-income borrowers. For example, an income-based repayment plan may not be the best choice for a high-income borrower who would rather have a set monthly payment and repay their debt over 10 years. In contrast an income-based plan might be a great option for someone in a starter job not making their goal salary yet. You’ll need  to compare your financial situation to the target borrower for the plan and decide if the plan makes sense for you.

Choosing the right repayment plan involves deciding your specific loan repayment goals and finding the plan that can make those goals come to life. All federal loan repayment plans can be changed at any time by contacting your loan servicer. If you’re not in the right repayment plan, break up with it for a better one, you won’t even need to burn all of it’s old things 🙂

After reading this post are you planning to kick your plan to the curb for something better or are you and your plan meant to be? Let me know in the comments below or on the Repayable Facebook Page. As always you can send me an email jeni@repayable.org or post your question in the Facebook group and I will help you navigate the minutia of plan choice.

Additional Resources

Repayable: Chapter 3 Ways to Repay

Federal Student Aid Overview of Repayment Plans