Mentor

Author: it-teaam

  • How To Make A Budget

    How To Make A Budget

    Making a monthly budget is one of the best strategies to help you get your financial house in order. A budget will also help you better manage your finances, and then find areas to reduce spending.

    Let’s start with how to make a budget.

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    Step 1: Create a new spreadsheet with columns for the next 12 months

    Step 2: Start by including your income

    You should include all sources of income, including your salary, bonuses, commissions, or other earned sources of income. Income may also include investment income, dividends, cash gifts and any other source of money inflows. Your salary may be paid every 2 weeks, but your bonus may be paid annually. Be sure to list the income in the month it is received so you can best approximate the timing of your cash flow.

    Step 3: Write down each and every expense category in your life today

    Your first expense can be student loans. Then, it may be helpful to categorize as follows. You can add, subtract or modify these categories as you see fit. This is a general construct.

    • Rent / Mortgage
    • Food
    • Transportation
    • Restaurants
    • Drinks
    • Morning coffees
    • Travel
    • Shopping
    • Hobbies
    • Other

    Step 4: Sum all your income. Sum all your expenses. Subtract Income less expenses.

    Step 5: The difference represents how much cash is left over at the end of the month

    Now, let’s work to make this number as high as possible.

    Step 6: Take action

    Now that you are staring at your financial self and can clearly articulate and see your income and expenses, it is time to create more money for yourself.

    There are two ways to make more money: (1) you can earn it; or (2) you can cut costs. You can also win the lottery, strike gold, or inherit grandma’s oil fortune. But, let’s put those aside for you.Now, where can you cut your budget and find more money to apply toward your student loans? We bet there are thousands of dollars in a given year that you can extract from your life and apply toward your student loan.

    Step 7: Evaluate each category and break it down to its component parts

    Lemonade Tip: As you evaluate each category, think about why each number is so high.

    Let’s break down each category.

    Rent / Mortgage

    • Can you downsize your current apartment or home?
    • Can you move in with a roommate to save costs?
    • Can you refinance your mortgage?

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  • How This 29-Year-Old Paid Off $113,000 in Student Loans In 7 Years

    How This 29-Year-Old Paid Off $113,000 in Student Loans In 7 Years

    Student loan repayment in less than 7 years. Meet Jessica Elberfeld – the Millennial who did it and shared her story with Mentor.

    Jessica Elberfeld moved to Nashville to chase her childhood dream to become a country music singer.

    After graduating Belmont University with $68,000 in student loans – including private loans with an interest rate as high as 10.75% – Elberfeld knew she had to do something more than an interest-only student loan repayment plan.

    Elberfeld shared with Mentor (and Forbes) her story and strategy to repay over $113,000 in student loans in just under seven years. Here is how she did it:

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    Zack Friedman (ZF): What was your original loan size and interest rate?

    Jessica Elberfeld (JE): The first two years of college were completely free through academic scholarships in my hometown of Gulf Shores, Alabama. I moved to Nashville in 2007 and borrowed $68,545.00 to attend Belmont University for the remaining two years of my degree. That total was made up of six different loans: four private and two federal. The federal loans combined only made up of $10,000 of the overall total and their interest rates were 6.0% and 6.8%. The private loans ranged from 8.25% to 10.75%.

    ZF: When you graduated, did you develop an initial action plan for student loan repayment? If not, then when?

    JE: No, I was simply on a hope and a prayer after graduating. I worked multiple jobs within the music industry to make sure I had enough money each month to cover everything and somehow it always worked out, but I knew that wouldn’t fly for very long given I was on an interest only repayment plan. Upon graduation, Sallie Mae gives you an option to choose an interest-only payment plan; this is appealing as it greatly reduces your monthly payment. You can only be on this payment plan for a maximum of four years throughout the life of the loan. Everyone I knew was on this plan after graduation. Hilarious how we all thought Sallie Mae was cutting us some kind of break.

    That being said, I didn’t develop an action plan for myself until 2013, four years after graduating. I knew my interest only payment plan was going away and my monthly payment was about to seriously balloon once the principal was introduced.

    ZF: How long did it take you to pay off your student loans?

    JE: I started repayment six months after graduating and made my first (interest only) payment in December 2009. I started aggressively paying my loans in early to mid-2013. I paid off all of my loans in November 2016. In total, a little less than seven years.

    ZF: What was your strategy?

    JE: Although I studied the approach of other financial advisors, I ultimately landed on Dave Ramsey’s Snowball Theory.

    I agreed with the math behind Suze Orman’s Avalanche Theory (pay the highest interest rate first regardless of the principal), but ultimately it was the behavior behind Dave Ramsey’s approach that made me choose his in the long run. In the very beginning, I practiced the Avalanche Theory: the first loan I paid off was the private loan with the highest 10.75% interest rate.

    I did this as it carried the smallest principal out of the other 3 private loans. I knew once I got the only double-digit interest rate loan I had knocked out, I could breathe a little easier and start the Snowball. From there, I paid off my two federal loans, and then knocked out one more private loan before consolidating the last two private loans. Ramsey’s strategy ended up working really well for me as the small wins gave me the confidence to crush the next big loan in line.

    ZF: How important to you was having a budget?

    JE: I’ll be honest. In the beginning, I didn’t really have one – not a strict one at least. I knew what my main expenses were, and I knew what I needed to have saved in order to hit my student loan goal that month. I wanted the loans paid off and that was the priority so my spending, for the most part, was in check to where I rarely missed the monthly goal I had set for myself. I wrote down all of my ‘unexpected expenses’ each month so if I missed goal by a certain amount, I could somewhat see why.

    Fast forward into late 2014/early 2015 and that is when my budgeting really started coming into existence. Once I started budgeting, it became the most important thing and it gave me the ultimate sense of control over my finances.

    ZF: How did you keep yourself accountable for your spending and meeting your budget?

    JE: I wrote the remaining balances of each loan down in a journal every month. Every single month. I wanted to see those numbers move and it was motivating to me to see my progress written in black and white. A lot of my friends also helped just by simply being in the same boat. I worked a lot too so that occupied a good portion of my time, which cut back on spending temptations.

    ZF: What advice can you give to borrowers who are trying to pay off their student loans?

    JE: Do what works best for you, but know the why behind your payoff.

    If you only kind of want it, you will only kind of get results. You have to really want it, then you have to go work towards it.

    There is an age-old saying that resonates so loudly with me which I absolutely love, “Never give up on something because of the time it takes to accomplish it. The time will pass any way.”

    In terms of your loans, you’re going to pay this huge sum of hard-earned money to a random lender for 30 years. The time is going to pass any way, and for me, I chose the path to being out of debt by 2016 versus 2032. An early payoff can seem a bit unrealistic from the outside, but once you are in there, it really does become second nature.

    If you are anything like me, once you see the amount of interest you are paying in comparison to your principal, it will light a fire inside of you making it your personal mission to not let the lender get a penny richer. To take it a step further from that, once you track your transaction history and calculate how much you have paid to a lender from your first month of repayment versus how much you still have left to go, it will almost break you.

    Add what you have paid thus far to the principal you still have remaining and that number, my friends, is where my $113,000 came from. It is that same summation on your own loans that will shake you down into a whole new way of spending.

    ZF: What did you do to celebrate paying off your student loans?

    JE: Over the course of my pay-off journey, many people asked me what I would do to celebrate and my answer was always, “Party!” So, party I did.

    A month after I paid them off, I hosted some of my closest friends at my home in Nashville. The name of the party was “Cheers to Breaking up with My Bae, Sallie Mae,” and the theme was obviously money. The night was filled with tons of chocolate gold coins, play money, Hundred Grand chocolate bars, mint cupcakes, confetti and champagne. I also had gigantic gold balloons that read ‘113K’ floating around the party. We listened to a playlist full of songs across all decades and genres about money such as: We Don’t Need No Education, If I Was A Rich Girl, All I Do Is Win, Workin’ 9 to 5, She Works Hard For The Money, and Bills Bills Bills.

    I am so blessed to have the incredible support system that I do. I moved to Nashville at 20-years-old knowing no one, and it blows me away to look around at who is present in my life here today.

    Jessica Elberfeld paid off $113,000 in student loans in less than seven years – an inspirational example of how to Mentor.

    Mentor can help you learn more about student loan options:

    You can read Part 2 of the Mentor interview here learn what’s next for Jessica’s financial life.

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  • Trump’s Student Loan Plan: Can He Make Student Loans Great Again?

    Trump’s Student Loan Plan: Can He Make Student Loans Great Again?

    Can this proposal help over 44 million borrowers with $1.4 trillion in student loans?

    This article also appeared in Forbes.

    If President-elect Donald Trump implements his proposed student loan plan, there may be good news on the horizon for millions of student loan borrowers.

    On October 13, Trump proposed an income-based repayment plan that allows borrowers to cap their monthly student loan payments based on their income and then have their student loans forgiven after a certain period of time.

    Under Trump’s plan, if you are a student loan borrower, your monthly student loan payments would be capped at 12.5% of your income. After 15 years of monthly payments, your remaining student loan debt would be forgiven.

    “Students should not be asked to pay more on the debt than they can afford,” Trump said then in Columbus, Ohio. “And the debt should not be an albatross around their necks for the rest of their lives.”

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    Student Loan Repayment: The Status Quo

    Today, the standard federal government student loan repayment period is 10 years. For those borrowers who cannot afford their monthly student loan payments, the federal government created income-driven repayment plans to help make student loan payments more affordable than the standard 10-year plan.

    Under the Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) income-driven repayment plans, you pay 10% of your discretionary income each month toward your federal undergraduate student loans for 20 years, at which point any remaining balance on your federal undergraduate student loan is forgiven. Under REPAYE, if you have graduate school student loan debt, the repayment period is 25 years before your remaining student loan debt is forgiven.

    Trump said he would combine the existing repayment plans into a single plan to make it less confusing for borrowers. While Trump’s proposal raises the monthly payment cap from 10% to 12.5% of income, his proposal forgives the remaining student loan balance five to 10 years sooner than the current income-driven repayment plans. He plans to pay for his student loan plan by reducing federal spending.

    The Fate of Public Service and Teacher Loan Forgiveness

    The federal government currently provides student loan forgiveness for public servants and teachers who meet certain qualifications, including a requisite number of monthly student loan payments. Public servants, for example, can have 100% of their student loans forgiven after 120 eligible on-time monthly payments.

    If Congress were to eliminate Public Service Loan Forgiveness (and place all borrowers into a single income-based repayment program), for example, existing borrowers likely would be grandfathered in, since they borrowed with the expectation of entering public service and qualifying for loan forgiveness. According to Mark Kantrowitz, publisher of Cappex.com, Public Service Loan Forgiveness alternatively could be restricted by capping the amount of loan forgiveness, restricting the eligible fields or establishing a means test for forgiveness.

    Other Potential Changes To Student Loans

    With respect to other federal student loan policies, expect more details to emerge from Trump’s nominee for Secretary of Education, Betsy DeVos, as well as congressional leaders such as Sen. Lamar Alexander (R-TN), chairman of the Senate Health, Education, Labor and Pensions Committee, and Rep. Virginia Foxx (R-NC), incoming chairwoman of the House Education and Workforce Committee.

    • Risk sharing between the federal government and universities with respect to students who default on their student loans
    • Potential reduction of the federal government’s role in student lending and a corresponding increase in the role of private lenders
    • Amount of “profit” the government generates from student loans, which may result in a reduction of interest rates for federal student loans

    Top 5 Questions and Answers

    Given Trump’s student loan proposal, what is the impact to you as a student loan borrower and what action steps can you take now?

    Here are five questions and answers:

    1. Will I save more money on my student loans under Trump’s plan compared with the current income-driven repayment plans?

    All else equal, Trump’s current proposal for borrowers to pay 12.5% of income for 15 years, if enacted into law, should save you more money than the current federal government repayment programs (PAYE and REPAYE), which require 10% of discretionary income per year for 20 or 25 years.

    2. How do I apply for student loan forgiveness?

    You don’t have to wait for Trump’s student loan plan to be implemented to apply for student loan forgiveness. You can sign up now for REPAYE or other repayment plans at studentloans.gov. There are certain criteria for each income-driven repayment plan and you have to recertify your income each year. Unfortunately, Parent PLUS loans are not eligible for either income-driven repayment plan.

    3. Does student loan forgiveness under Trump’s plan mean I will not owe any more money after my student loan is forgiven?

    Under current repayment plans, if you work in the private sector and have a remaining student loan balance at the end of your repayment period, then you may be required to pay ordinary income tax on any student loan amount forgiven. Therefore, your student loan debt is not completely forgiven. Rather, your education debt is exchanged for tax debt. If you work in the public sector and have a student loan balance at the end of your repayment period, then you are not taxed on any student loan amount forgiven. Trump has yet to indicate whether he supports the same policies.

    4. Will Trump’s plan lower my monthly student loan payment?

    Trump believes that the federal government should not profit on student loans, but has not indicated whether the current interest rate for student loans will be lowered. However, you don’t have to wait for Trump’s student loan plan to take effect to get a lower interest rate on your student loans. You can refinance today with private student loan lenders who can offer lower interest rates than the federal government for borrowers with strong credit (or who have a qualified co-signer).

    5. What are the benefits and risks to income-driven repayment plans?

    There are benefits and risks to income-driven repayment plans, including PAYE and REPAYE.

    The benefit: you save money upfront from lowering your monthly student loan payment or extending the repayment period.

    The risk: you will pay more interest over time because lower monthly payments means you are reducing less principal each month. You also may be required to pay ordinary income tax on the loan amount forgiven.

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  • Parent Loans vs Private Student Loans

    Parent Loans vs Private Student Loans

    In this head to head matchup, we compare Parent Loans offered through the federal government and private student loans offered through a private student loan company.

    New Student Loans and Parent Loans

    Do you need an undergraduate student loan, graduate school student loan or Parent Loan?

    If you are a current or incoming undergraduate or graduate student (or the parent of one), there are other options in addition to federal student loans to help you pay for school. Based on your credit profile and financial background (and, if applicable, that of a qualified co-signer), you could save significant money compared with a traditional, big bank.

    Students Loans are available for both graduate students (business, medicine, dental, law, pharmacy, and other graduate programs) as well as undergraduate students.

    Parent Loans are a good option for parents with strong credit who want to borrow the cost of their child’s graduate or undergraduate education.

    We have identified our top new student loans and Parent Loans in 2018. You can learn more about student loans, parent loans, student loan interest rates, loan terms and more.

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  • The Best Law School Student Loans

    The Best Law School Student Loans

    Law school is a considerable investment – both in time and money. So, when it comes to law school student loans, you will need to understand your options beyond student loans from the federal government. For law school, you can borrow both federal student loans and private student loans.

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    Federal student loans are available through the federal government. If you borrow a federal student loan, you’ll get a fixed interest rate and have access to certain benefits such as income-driven repayment plans, forbearance and deferment. Plus, you can apply for student loan forgiveness through several different programs.

    However, most student loan borrowers can’t fund their law school education entirely with federal student loans. Why? The federal government limits the amount of federal student loans that you can borrow. Therefore, you’ll likely need to explore alternative sources to fund your law school education. For example, scholarships, grants and private student loans are all potential options to pay for law school.

    The average law school student graduates law school with over $140,000 in student loans. However, the good news is that there are several private student loan lenders who can offer competitive rates for your law school loans. In contrast to federal student loans, private student loans offer both fixed-rate and variable-rate student loans. If you have a strong credit score, your interest rate on a private student loan could be lower than your interest rate on a federal student loan.

    If you are applying to law school or already have been admitted, congratulations! Getting into law school is a major accomplishment. However, if you haven’t started law school yet, it’s never too early to start planning for your student loans.

    These are our top picks for student loans for law school. When you choose student loans for law school, you should borrow federal student loans first. To apply, you can complete the Free Application For Federal Student Aid (FAFSA).

    Once you borrow the maximum amount of federal student loans, then you should find the best private student loans for you. For private student loans, you’ll work with a private lender. Typically, private student loans have lower interest rates than federal student loans.

    Where should you start? Comparing student loans is easier than you may think. Here are some important steps:

    1. Evaluate each lender.
    2. Compare interest rates.
    3. Choose a fixed or variable interest rate.
    4. Understand student loan terms.
    5. Check your new interest rate with no impact to your credit.
    6. Apply to multiple lenders.

    It’s helpful to apply to multiple lenders. Why? Applying to multiple lenders is a smart way to maximize your chances for approval. Plus, you can compare interest rates and loan terms. Then, you should choose the interest rate and student loan payment terms that work best for you.

    Also, make sure to check your interest rate for free. Most lenders will do a soft credit check, which takes a few minutes and has no impact to your credit score. Checking your new interest rates with several lenders can help you decide which lenders are best for you before you apply.

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  • Top 10 Ways To Pay Off Your Student Loans Faster

    Top 10 Ways To Pay Off Your Student Loans Faster

    Let’s face it. No one wants student loan debt. And no one wants to spend the rest of their life taking a large percentage of their paycheck to make that monthly student loan payment. Yeah, you get a tax deduction, but it doesn’t feel very good and it seems never ending.

    In an ideal world, your goal should be to get out of debt – and as fast as possible.

    Easier said than done, right? Well, it doesn’t have to be that way. You can make some changes that will help you to slay the proverbial student loan debt dragon.

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    Here are our Top 10 ways to pay off your student loan debt faster. Let’s dive in:

    1. Pay more than the minimum payment

    Student loan, mortgage and credit card companies like to show you a minimum monthly payment – that relatively small number that you need to send in each month to satisfy your student loan obligation. The problem is they want you to make only the minimum payment. Why? When you make only the minimum payment, more and more interest accrues on your loan.

    Take back control over your student loan. Pay more than the minimum amount. This can be any amount of money that makes you feel comfortable – whether it is $10 or $100 more per month. The point is you should be consistent and pay the same amount every month.

    Lemonade Tip: Tell your student loan lender you want to pay more than the minimum repayment and they can help you set up your desired amount on autopay. This way, you can “force” yourself to make that higher payment. For example, if your minimum monthly payment is $300, consider paying $350 per month instead. The more you can pay, the closer you will be to paying off your student loan faster.

    2. Make an extra payment

    This is similar to paying more than the minimum payment. In fact, you can use this strategy in addition to paying more than the minimum payment. For example, each year you have to make 12 payments. Instead of just making 12 payments, make a 13th payment. Ideally, it would be for the same amount as your usual monthly payment. If not, you can choose any amount with which you are comfortable. The goal is to reduce your principal balance in order to limit additional interest from accruing. This strategy also works well to reduce credit card debt and mortgage debt.

    Lemonade Tip: Be sure to contact your student loan company and instruct them to apply your extra payment toward your principal balance, and not toward your next monthly payment.

    3. Consolidate your student loans

    Student loan consolidation means that you combine more than one student loan into a single student loan, and the resulting interest rate is a weighted average of the student loans that were combined. This way, you get one student loan with one interest payment, which makes it easier to manage your student loan. With a single monthly payment, you are still afforded borrower protections such as flexible income-driven student loan repayment plans and student loan forgiveness.

    Lemonade Tip: One of the benefits of student loan consolidation is certain protections afforded to borrowers such as income-based student loan repayment options and student loan forgiveness. These can be good options for public servants and teachers, for example.

    4. Refinance your student loans

    This is the number one strategy for you to get a better interest rate and combine all your student loans into a single student loan with one monthly payment. The goal is to obtain the lowest interest rate possible to limit the amount of interest that accrues on your student loans.

    Lemonade Tip: Student loan lenders are offering interest rates as low as 2-3%, which is much lower than the government and in school private loan interest rates.

    5. Refinance your student loans and pay the same monthly student loan payment as before

    If you want to pay off your student loans super fast, and you can afford the monthly student loan payments, consider (a) private student loan refinancing; and (b) keep the same monthly payment you make under your existing loan.Here is how it works:Let’s assume you have an existing 20-year student loan with an outstanding balance of $100,000 and your current student loan interest rate is fixed at 6.8%. That means you pay $763 per month in principal and interest, assuming a standard student loan repayment plan. Now, imagine you refinance that same $100,000 student loan and your new 20-year fixed interest rate is 3%. That means you pay $554 per month in principal and interest, assuming a standard repayment plan.

    Now, you could pocket the difference of $763 – 554, or $209, which represents the savings between your existing and new loan.

    But, let’s assume you continue to pay the $763 each month, even though you are only required to pay $554. That means that each month, $209 will go toward a reduction in principal. This will not only save you interest, but also reduce your principal payment and help you pay off your student loan faster.

    Lemonade Tip: This strategy is cool because if you can afford the same monthly payment (and we realize this is an “if”), it is an easy way to pick a consistent, incremental amount to contribute each month. Since you have been making these payments already each month, why not continue?

    6. Apply your bonus to pay off your student loan

    It is tempting when bonus time rolls around to take that hard earned money and take a nice vacation or buy a new car. You can tell yourself that those would be good ideas, but then remind yourself that first and foremost you need to pay off your student loans first and get debt free. If you can apply the bulk, or even the entire amount, of your bonus to reduce the principal balance of your student loans, you will be on a faster path to be debt free.

    7. Make a budget and then cut it

    There are two ways to make more money: (1) you can earn it; or (2) you can cut costs. You can also win the lottery, strike gold, or inherit grandma’s oil fortune. But, let’s put those aside for you.Write down each and every expense in your life:

    • Rent / Mortgage
    • Food
    • Transportation
    • Restaurants
    • Drinks
    • Morning coffees
    • Travel
    • Shopping
    • Hobbies
    • Other

    Now, where can you cut your budget and find more money to apply toward your student loans? We bet there are thousands of dollars in a given year that you can extract from your life and apply toward your student loan.

    Lemonade Tip: Are you a morning coffee drinker? Forget those $3 coffees each day. Instead, you will have about $1,000 by the end of the year that you can apply directly to reduce your student loan.

    8. Pay your student loan every two weeks

    You don’t have to make student loan payments once per month. Instead, consider making student loan payments twice per month. Since most people get paid every two weeks, you can time the student loan payments based on your paychecks.Now, before you say, “But how can I afford making twice the amount of student loan payments each month?”You still will pay the same monthly payment as you always do. However, you will split your monthly student loan payment in two. If your monthly payment is $1,000, then pay $500 every two weeks.

    9. Try to avoid student repayment programs, if possible

    If you are struggling to pay your student loans, then you may have no choice but to apply for an income-based student loan repayment program. The downside of these student loan repayment programs is that the way they lower your monthly payments is by extending the term of your student loan. While this helps provide relief in the short term, it actually works against your goal of faster student loan repayment.

    10. Use your tax refund

    The interest on your student loans is tax deductible. Make sure you take full advantage of this important deduction. If you receive a tax refund at the end of the year, you can use this tax refund to make a lump sum payment applied toward principal balance of your student loan.

    Lemonade Tip: You can deduct up to $2,500 per year in student loan interest. Don’t miss this important tax deduction.

    Want to save money on your student loans? We have identified our top student loan refinancing picks for 2018 to help you save money. These lenders may be able to help you save thousands of dollars on your student loans by offering lower interest rates and lower monthly payments. That’s real money back in your pocket.

    Learn your new student loan interest rate in only 2 minutes.

    You can save up to $30,000 or higher with student loan refinancing depending on your degree and interest rate.

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  • The Best Graduate School Student Loans

    The Best Graduate School Student Loans

    Let’s explore our top picks for the best graduate school student loans.

    If you’re in graduate school or considering graduate school, then you know it’s a considerable investment. The average graduate school student graduates with over $60,000 in student loans. That said, graduate school can lead to higher lifetime income compared with those who do not earn a graduate school degree. When funding your graduate degree, it’s likely that you will consider both federal student loans and private student loans. Depending on the cost of your program, you may need to borrow both federal and private student loans.

    Federal student loans come with certain benefits. This includes, among others:

    • Income-driven repayment
    • Student loan forgiveness
    • Forbearance
    • Deferment

    You can apply for federal student loans for graduate school by completing the Free Application For Federal Student Aid (FAFSA). Generally, you should borrow the maximum amount of federal student loans before borrowing private student loans. The disadvantage of federal student loans is that you may pay a higher interest rate. Why? Every federal student loan borrower gets the same fixed interest rate regardless of their credit score. So, if you have a high credit score, you may be overpaying for your federal student loans.

    In contrast, private student loans are based on your credit score, income and other factors. Generally, the interest rate on a private student loan is lower than the interest rate on a federal student loan. The good news is that there are several private student loan lenders who can offer competitive rates on your graduate school student loans.

    If you are applying to graduate school or already have been admitted, congratulations! If not, it is never too early to start planning for your graduate school student loans.

    Learn your new graduate school student loan interest rate in a matter of minutes.

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  • What Is Student Loan Consolidation?

    What Is Student Loan Consolidation?

    Student Consolidation: The Basics

    Should I consolidate my student loans? What is student loan consolidation? It’s a popular question, and it’s important to understand what student loan consolidation means and how it can impact your student loans.

    Student loan consolidation is the process of combining multiple federal loans into one student loan called a Direct Consolidation Loan. When you consolidate student loans, you are issued a new federal student loan by the federal government, the proceeds of which are used to repay your old loans.

    The direct consolidation loan program is managed by the U.S. Department of Education.

    Contact: Federal Student Aid
    Phone: 1-800-557-7392

    You can consolidate your federal loans after you graduate, leave school or attend school less than half-time enrollment.

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    In this guide, you will learn everything you need to know about student loan consolidation, including:

    Student Loan Consolidation: Key Features

    • Only have 1 monthly student loan payment
    • Only 1 have student loan servicer
    • Can lower your monthly student loan payment by choosing an income-driven repayment term, and extending student loan repayment from 10 years to 20 or 25 years
    • Only 1 student loan interest rate
    • Only federal student loans (not private loans) are eligible

    We frequently get asked several loan consolidation questions. Here are some of the most popular questions related to student loan consolidations:

    Why Should I Consolidate Student Loans?

    There are several pros and cons to a Direct Consolidation Loan.

    Pros of Student Loan Consolidation

    • If you want to combine multiple federal loans into one single student loan payment, then loan consolidation may be the right decision
    • You may gain access to certain types of student loan repayment plans, particularly student loan repayment plans such as deferment or forbearance that allow you to limit or postpone your loan payments in the short-term due to economic hardship or loss of employment
    • You also may be able to lock in a fixed interest rate loan, for example, if you currently have a variable interest rate loan and do not want to be beholden to swings in interest rates

    Cons of Student Loan Consolidation

    • While student loan consolidation may enable you to repay your student loans in 10 to 30 years with various student loan repayment plan options, you will end up making more monthly payments and accruing more interest
    • You have certain borrower benefits that exist with your current student loans. Some of these benefits may include interest rate discounts or student loan cancellation, for example. If you consolidate student loans, you may lose some of these borrower protections, which can make the cost of repaying your student loan higher.
    • Once you consolidate student loans, your old loans are paid off so you cannot go back and reap prior benefits or features

    What Types of Student Loans Can I Consolidate?

    Student loan consolidation applies to federal student loans, rather than private loans.

    So if you have both federal and private student loans, then you can only consolidate federal loans.

    Your other option is student loan refinancing, which allows you to combine both your federal and private loans into a single student loan, single (lower) interest rate and single student loan servicer.

    Per the U.S. Department of Education, the types of federal loans that can be consolidated include:

    • Direct Subsidized Loans
    • Direct Unsubsidized Loans
    • Subsidized Federal Stafford Loans
    • Unsubsidized Federal Stafford Loans
    • Direct PLUS Loans
    • PLUS loans from the Federal Family Education Loan (FFEL) Program
    • Supplemental Loans for Students (SLS)
    • Federal Perkins Loans
    • Federal Nursing Loans
    • Health Education Assistance Loans

    Will Student Loan Consolidation Lower My Interest Rate?

    While student loan refinancing lowers your interest rate, student loan consolidation gives you a weighted average interest rate of your existing student loans, rounded up to the nearest 1/8%. To calculate the weighted average interest rate of your student loans, you can use our weighted average interest calculator.

    What Are The Requirements To Consolidate Student Loans?

    You must have at least one Direct Loan or FFEL program student loan that is in a grace period or student loan repayment.

    Can I Consolidate A Defaulted Student Loan?

    Yes, you can consolidate a defaulted student loan. However, you first have to work with your current student loan servicer to agree on proper student loan repayment. Alternatively, you can select a student loan repayment plan for your direct consolidation loan such as Income Based Repayment Plan, Pay As You Earn Repayment Plan, Income-Contingent Repayment Plan.

    Are There Prepayment Penalties For Direct Consolidation Loans?

    No, you can repay your direct consolidation student loan at any time with no prepayment penalties.

    Is There An Origination Fee When You Consolidate Student Loans?

    There are no fees to consolidate your student loans. Whether you consolidate student loans with the federal government or choose student loan refinancing, there are no origination fees.

    Can Parents Consolidate Parent PLUS Loans?

    Yes, you can consolidate Parent PLUS Loans. However, parent loans and student loans cannot be consolidated together.

    The parent and the student would have to consolidate their loans separately.

    While students can only consolidate student loans during the grace period or when student loans have entered repayment, parents can consolidate Parent PLUS Loans at any time.

    When Does Repayment On A Consolidation Student Loan Begin?

    Repayment on a direct consolidation student loan begins within 60 days of the student loan disbursement unless you qualify for some form of student loan repayment plan such as student loan deferment or student loan forbearance.

    Should I consolidate or refinance my student loans?

    The question “Should I consolidate or refinance my student loans?” is a popular one. The answer is: it depends on your financial goals and financial situation.

    Student Loan Refinancing: Student loan refinancing allows you refinance all, some or one of your student loans into a new, private student loan with a lower interest rate. Your new student loans pays off your old student loans, and the result is a single student loan, single month payment and single student loan servicer. If you want a lower rate and want to pay off your student loans faster, then student loan refinancing may be best for you.

    Student Loan Consolidation: Student loan consolidation is a helpful organizational tool, but it won’t lower your interest rate. If you plan to use income-driven federal repayment programs such as PAYE or REPAYE, then consolidating student loans could make sense. If you plan to pursue Public Service Loan Forgiveness, then federal consolidation could be your preference.

    This consolidation vs student loan refinancing calculator compares student loan consolidation and student loan refinancing, and shows you what your monthly payments will look like and how much money you can save.

    Student loan consolidation: Final Thoughts

    Student loan consolidation can be a great way to combine your federal student loans into a single student loan with a single interest rate and single loan servicer. However, student loan consolidation will not lower your interest rate. If your goal is to lower your interest rate and pay off student loans faster, you should consider student loan refinancing.

    While a student loan income-driven repayment plan can lower your monthly payments and help improve short-term cash flow, it will hurt long-term in the form of increased interest payments.

    Also, be sure to understand fully which borrower protections and benefits you may lose with student loan consolidation relative to your existing student loans.

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  • The Best Pharmacy School Student Loans

    The Best Pharmacy School Student Loans

    Are you looking for the best pharmacy school student loans? Better yet, want to save money on your student loans? If you’re like most aspiring pharmacy school students, the answer to both questions is “yes.”

    As you may know, pharmacy school is a considerable investment – both in time and money. So, when it comes to your student loans, make sure you understand all your options.

    The average pharmacy school student graduates medical school with over $120,000 in student loans. Most pharmacy students borrow federal student loans, private student loans or both.

    Federal student loans are available through the federal government. If you borrow a federal student loan, you’ll get a fixed interest rate and have access to certain benefits such as income-driven repayment plans, forbearance and deferment. Plus, you can apply for student loan forgiveness through several different programs. With student loan forgiveness, you could get all or some of your federal student loans forgiven.

    However, most student loan borrowers can’t fund their pharmacy school education entirely with federal student loans. Why? The federal government limits the amount of federal student loans that you can borrow. Therefore, you’ll likely need to explore alternative sources to fund your pharmacy school education. For example, scholarships, grants and private student loans are all potential options to pay for pharmacy school.

    The good news is that there are several private student loan lenders who can offer competitive rates on your student loans. If you are applying to pharmacy school or already have been admitted, congratulations! If not, it is never too early to start planning for your student loans.

    These are our top picks for the best student loans for pharmacy school. Compare lenders, loan terms and rates to find the best option for you. Learn your new student loan interest rate in a matter of minutes.

    [private_student_loans_table]

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