Category: Student Loan Refinancing

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.”

[refinance_student_loans_table]

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.

[related_posts post_1=’318′ post_2=’327′ post_3=’333′]

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.

[refinance_student_loans_table]

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.

[related_posts post_1=’318′ post_2=’321′ post_3=’330′]

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.

[refinance_student_loans_table]

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

• Student loan consolidation: Key Features
• Why should I consolidate student loans?
• What types of student loans should I consolidate?
• Will student loan consolidation lower my interest rate?
• What are the requirements to consolidate student loans?
• Can I consolidate a defaulted student loan?
• Are there prepayment penalties for Direct Consolidation Loans?
• Is there an origination fee when you consolidate student loans?
• Can parents consolidate Parent PLUS Loans?
• When does repayment on a consolidation student loan begin?
• Should I consolidate or refinance my student loans?
• Student loan consolidation: Final Thoughts

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.

[related_posts post_1=’318′ post_2=’321′ post_3=’330′]

If you want to refinance your student loans but are not sure if you will get approved, here are the 11 student loan refinancing secrets that you need to know.

Refinancing your student loans allows you to consolidate your existing private and federal student loans into a new, single student loan with a lower interest rate. The result is lower monthly payments, which frees up extra money to repay more student loan debt, save or invest.

Student loan refinancing could save you more than $20,000 over the life of your student loans. If you have student loans from a health-related degree, your savings may be even higher than $30,000.

According to the latest student loan debt statistics, your cost savings can be even higher given the average student loan debt balance upon graduation for each degree type:

Dental School: $260,000
Medical School: $180,000
Pharmacy School: $160,000
Veterinary School: $140,000

[refinance_student_loans_table]

So how exactly do you get approved to refinance student loans?

It is no secret that private student loan lenders have strict underwriting criteria. By lending you money, private lenders are putting their own capital at risk (not the federal government’s money). As such, private student loan companies lend to borrowers who they believe will repay their student loans.

Of course, each lender has its own underwriting criteria and each applicant’s financial background and circumstance is unique. While approval for student loan refinances is not guaranteed and a rejection letter may seem unfair or frustrating, here is a general roadmap to help you increase your chances for student loan refinance approval.

1. Credit Score

Your credit score is a barometer of your financial responsibility. Most lenders evaluate your credit score (or its underlying components), and want to ensure that you meet your financial obligations and have a history of on-time payments. Generally, top lenders expect a minimum credit score in the mid to high 600’s, while others do not have a minimum.

Insider Tip: To maximize your chances for approval, you should aim for a credit score of 700 or higher.

2. Income

Private student loan lenders want to ensure that you have sufficient income to repay your student loans. Lenders want proof that you have stable and recurring monthly income and cash flow. Examine your pay stubs and identify your after-tax monthly income. When you subtract your proposed monthly student loan payments, does a sufficient amount remain for other essential living expenses?

Insider Tip: If you do not have sufficient income, you can increase your chances for approval with a qualified co-signer who has a strong credit profile.

3. Other Debt

Your other consumer debt such as mortgage, credit card or auto debt will influence underwriting your student loan. If you have existing debt obligations, lenders will account for your total monthly debt payments as part of the underwriting process.

Insider Tip: Try to repay your other debt obligations as much as possible prior to applying to refinance student loans.

4. Debt-To-Income Ratio

Student loan lenders will focus on your debt-to-income ratio, which is the ratio of your total monthly income compared with your monthly debt obligations. For example, if you have $10,000 of monthly income and $3,000 of monthly debt expenses, then your debt-to-income ratio is 30%.

Insider Tip: The lower your debt-to-income ratio, the better. You can improve your debt-to-income ratio by increasing income or decreasing debt (or both).

5. Employment

You should be employed or have a written job offer when you apply to refinance student loans. Some private student loan lenders will refinance your student loans while in school or residency, while others will require some work experience.

Insider Tip: If you are unemployed or underemployed, it will be difficult to be approved for student loan refinance (although you can try with a co-signer).

What To Do If You Get Rejected For Student Loan Refinance

1. Apply to multiple lenders

There is no limit on the number of lenders to which you can apply to refinance your student loans. You should apply to multiple lenders to maximize your chances for approval.

Insider Tip: If you apply to multiple lenders within 30 days, typically this is treated as a single inquiry on your credit report.

2. Check your credit report

Make sure that you have reviewed your credit report for any errors. If there are any errors, you should dispute them.

Insider Tip: Your credit report is a gateway to financial freedom. Make sure your credit report is accurate.

3. Consolidate debt

If you have outstanding debt, you should consolidate your debt into a lower interest rate loan.

Insider Tip: If you have outstanding credit card debt, you should consider debt consolidation with a personal loan to lower your interest rate.

4. Pay off your debt

Your debt-to-income ratio is driven by two factors: debt and income. If you lower your debt or increase your income (or preferably both), you will improve your debt-to-income ratio. Use a monthly budget to cut expenses and manage your finances. Use the cost savings to make extra student loan debt payments.

Insider Tip: Lenders want to ensure that you have a healthy debt-to-income ratio to ensure that you can pay off your student loans – and meet your other debt obligations.

5. Increase your income

The flip side of lowering your debt is raising your income.

Insider Tip: Ask for a raise, negotiate a higher bonus or seek a side hustle.

6. Get a qualified co-signer

Ask your spouse, parent, grandparent or someone else close to you to act as a co-signer for your student loans. Your co-signer needs to have a strong credit profile and be willing to be equally responsible with you for your student loan.

Having a qualified co-signer can make the difference between “approve” and “not approve.”

Insider Tip: The good news for your co-signer is that many student loan lenders offer a co-signer release, which releases your co-signer of financial responsibility meeting certain qualifications.

Student Loan Refinancing Calculator

You can use the Mentor Student Loan Refinancing Calculator to calculate your potential savings when you refinance your student loans.

[related_posts post_1=’318′ post_2=’321′ post_3=’357′]

Will President Trump make student loans great again?

As President Trump marks his first 100 days in office, it’s helpful to recap the latest developments that will impact your student loans.

According to Mentor, there are over 44 million borrowers with over $1.3 trillion in student loan debt, and the average student in the Class of 2016 has $37,172 in student loan debt.

Here’s what you need to know to help you make more informed decisions regarding student loan refinance, student loan consolidation, student loan repayment and student forgiveness.

[refinance_student_loans_table]

Potential For New Student Loan Income Repayment Plan

Last October, then-candidate Trump proposed an income-based repayment plan that would 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.

Today, the standard federal government student loan repayment period is 10 years.

Under Trump’s proposed 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.

While Trump’s proposal would raise the monthly payment cap from 10% to 12.5% of income, his proposal would forgive the remaining student loan balance five years (undergraduate loans) to 10 years (graduate student loans) sooner than the current income-driven repayment plans.

Action Step: This plan was proposed during the presidential campaign, but is not currently available yet to student loan borrowers. Stay tuned.

The Fate Of Public Service Student Loan Forgiveness

The Public Service Loan Forgiveness Program is a federal program that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) non-profit job who make the majority of 120 eligible on-time payments under an income-driven repayment plan.

There are only two types of federal student loans that qualify: Direct Loans (such as Stafford Loans) and a Federal Direct Consolidation Loan.

Therefore, private student loans are not eligible.

What is the future of the Public Service Loan Forgiveness Program?

There are several different possibilities: the program could be continued, modified, eliminated or folded in to a new repayment plan program.

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.

Alternatively, for example, the amount of loan forgiveness or eligible fields could be restricted.

Action Step: If you currently work in public service, ensure that you are making 120 consecutive monthly payments, and that you work in a qualifying public service job. If you are a current student, it is possible that the program may not exist at the end of your 10 years of public service employment. Be mindful of this possibility as you plan your career. 

Student Loan Forgiveness Letters May Be Invalid

As first reported by the New York Times, however, a student loan borrower’s acceptance into a federal student loan forgiveness program may not be binding and could be rescinded by the U.S. Department of Education.

In a legal filing March 23, the Education Department said that student loan borrowers could not rely on the approval letters sent by the program’s administrator, FedLoan Servicing, because any approvals are considered tentative.

Although not required, you should submit (in addition to your monthly student loan payments) the Public Service Loan Forgiveness Employment Certification Form annually or whenever you change jobs to help you track your progress toward meeting the program’s eligibility requirements.

Then, you should submit the form and employer’s certification to FedLoan Servicing, which is the U.S. Department of Education’s student loan servicer for the program.

FedLoan Servicing will inform you if you are eligible, how many qualifying student loan payments you have made, and how many qualifying student loan payments remain for you to qualify for Public Service Loan Forgiveness.

Action Step: Your public service role and employer matter, if you want to qualify for Public Service Loan Forgiveness Program. While the program includes employment at a 501(c)(3) non-profit organization, not every non-profit or type of employment qualifies. Keep that in mind when considering Public Service Loan Forgiveness, your employer and position.

More Fees For Student Loan Borrowers In Default

In a two-page “Dear Colleague” letter, the U.S. Department of Education asked guarantee agencies to disregard a July 2015 memorandum issued by the Obama administration that forbid the agencies from charging up to 16% of the principal and interest accrued on student loans if the borrower entered the government’s student loan rehabilitation within 60 days of default.

As a result, loan guarantee agencies that collect on defaulted debt can charge borrowers who have defaulted on their federal student loans fees up to 16% on their student loan balances – even when these borrowers promise to make good on their student loans within 60 days.

These fees only applies to you if your student loan is in default and you borrowed a federal loan prior to 2010 through the Federal Family Education Loan (FFEL) Program.

Although the FFEL program has not issued a new loan since 2010, according to Mentor, approximately 7 million borrowers with $162 billion in FFEL student loans held by guarantee agencies could be impacted.

Action Step: Your best option is to consolidate your student loans. When you consolidate your FFEL student loans into a Direct Consolidation Loan, you can be protected by the 60-day grace period.

Navient’s Take On Its Student Loan Lawsuit

If you have a student loan, there is a good chance that it may be serviced by Navient, the nation’s largest student loan servicer.

In a lawsuit filed against Navient in a Pennsylvania federal court in January, the Consumer Financial Protection Bureau (CFPB) alleged that, among other allegations, Navient “systematically and illegally [failed] borrowers at every stage of repayment.”

As this lawsuit was filed by a government agency (the CFPB), it is not a class action lawsuit and therefore individual litigants cannot participate.

In a statement, Navient denied all allegations and said the lawsuit was politically motivated. In March, Navient filed a motion to dismiss the case, and argued that it is not a fiduciary financial advisor.

According to Navient, Navient’s relationship with borrowers is that of an arm’s-length student loan servicer.

Navient says its role is to collect payment owed by borrowers – and in this role, “the servicer acts in the lender’s interest,” and there is “no expectation that the servicer will ‘act in the interest of the consumer.’”

Action Step: There is more to come in this ongoing case, including the role of student loan servicers. Is their role to advise student loan borrowers, or is their role only to collect and process student loan payments?

Additional Action Steps

What additional action steps can you take?

1. Understand all your student loan options

Get empowered and stay on top of your student loans. Don’t rely on your student loan servicer to have all the answers. Do your homework and understand your options:

• Student Loan Refinancing
• Federal Student Loan Consolidation
• Income-Driven Repayment Plans
• Student Loan Forgiveness

2. Contact the Consumer Financial Protection Bureau

If you want to file a formal complaint regarding your student loan lender or student loan servicer, contact the Consumer Financial Protection Bureau.

The CFPB supervises financial services companies and enforces federal consumer financial laws.

Once you submit a complaint to the CFPB, the CFPB will forward your complaint to the student loan company or servicer, which will have 15 days to respond regarding your complaint and the proposed steps that will be taken to resolve your complaint. Once you receive the company’s response, you have 60 days to provide feedback.

3. Develop an individualized action plan

You need an action plan that is tailored for your specific financial life circumstance.

Don’t let your student loan servicer steer you toward a short-term option when you should choose the long-term solution.

When it comes to your personal finances, financial knowledge is power.

[related_posts post_1=’318′ post_2=’327′ post_3=’333′]

For many student loan borrowers, student loan forgiveness seems like an elusive golden ticket to financial freedom. That’s why it’s essential that you learn how to ace student loan forgiveness.

For those that qualify, student loan forgiveness programs can be confusing and difficult to navigate.

What are student loan forgiveness programs available? How do you apply? Will you qualify? Will your student loans really be forgiven?

The good news is that there are multiple ways to have your student loans forgiven – partially or in full.

[refinance_student_loans_table]

Here is what you need to know about student loan forgiveness:

1. Student Loan Forgiveness: The Status Quo

Today, the standard student loan repayment period is 10 years. However, the federal government created several income-driven repayment plans (including PAYE and REPAYE) to help make student loan payments more affordable for borrowers who cannot afford their monthly payment.

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.

2. Student Loan Forgiveness: President Trump’s Plan

On October 13, 2016, 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.

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.

3. Public Service Loan Forgiveness

Through Public Service Loan Forgiveness, public servants can have 100% of their student loans forgiven after 120 eligible on-time monthly payments.

At this time, however, the future of Public Service Loan Forgiveness is uncertain. President Trump’s most recent budget proposal calls for the elimination of the Public Service Loan Forgiveness for new loans originated after July 1, 2018.

There are several possibilities regarding Public Service Loan Forgiveness, including, among others:

• The Public Service Loan Forgiveness program continues in its current form
• Congress eliminates the Public Service Loan Forgiveness program
• Congress eliminates Public Service Loan Forgiveness and places all borrowers into a single income-based repayment program such as the 15-year student loan forgiveness program that Trump proposed
• Congress could cap the amount of Public Service Loan Forgiveness
• Congress could restrict the employment fields that qualify for Public Service Loan Forgiveness
• Congress could establish a means test to qualify for Public Service Loan Forgiveness

Although not guaranteed, if the current Public Service Loan Forgiveness changed or were eliminated, existing student loan borrowers likely would be grandfathered in, since they borrowed with the expectation of entering public service and qualifying for loan forgiveness.

This Public Service Loan Forgiveness Calculator can help you calculate your total potential student loan forgiveness.

4. Teacher Student Loan Forgiveness

Teacher Student Loan Forgiveness is for full-time teachers with five complete and consecutive years of teaching experience in a designated elementary or secondary school, or educational service agency, that serves students from low income families.

Teachers with federal Direct Loans or Stafford Loans are eligible to have up to $17,500 forgiven if they are highly-qualfied full-time math or science teacher in an eligible secondary school. Elementary or secondary school teachers who teach in an area related to their academic major are eligible to have up to $5,000 forgiven. Student loans that were originated prior to October 1, 1998 are not eligible.

5. Perkins Student Loan Cancellation

Public servants also can have up to 100% of their Perkins student loans cancelled.

Qualified public servants for Perkins student loan cancellation include, among others, members of the armed forces who served in a hostile fire or imminent pay danger area, firefighters, law enforcement and corrections officers, teachers, nurses, medical technicians, public defenders and VISTA or Peace Corps volunteers.

6. Student loan refinancing is a secret student loan forgiveness tool

What do student loan refinance and student loan forgiveness have in common?

More than you think.

While the federal government forgives student loans, the federal government does not refinance them.

Student loan refinancing is made possible through private financial lenders who can offer both fixed and variable interest rates below the current interest rates on your federal student loans.

Why? Every borrower receives the same interest rate on a federal student loan – regardless of his or her credit profile. If you have a strong credit profile, effectively you are paying more for your student loans from the federal government based on your underlying credit risk as a borrower.

When you borrowed your student loans as a full-time student, you likely did not have the credit history or income to receive a low interest rate. Now that you have graduated and have work experience and a stable income, lenders are more willing to lower your interest rate.

Private lenders will underwrite you based on your personal credit profile, income, cash flow and other financial factors. If you have strong credit, stable income and sufficient cash flow to pay your debt, a private student lender can refinance your student loan at a lower interest rate.

For example, let’s assume that you have $100,000 of student loan debt at a 6% interest rate. (Many student loan debt borrowers have student loan debt at even higher interest rates). Today, if you have a strong credit profile and sufficient income, you can refinance student loans with some lenders at 2.5% (or lower).

In this example, if you repay your student loans in 10 years, you could save over $20,000 from refinancing your student loans.

This student loan refinancing calculator shows you how much money you can save by refinancing your student loans. You can calculate both your new monthly payment and total savings.

By refinancing your student loans, you can wipe out a chunk of interest that you otherwise would have had to pay.

Consider these cost savings a form of “student loan forgiveness.”

[related_posts post_1=’312′ post_2=’327′ post_3=’354′]

Hillary Clinton has offered a student loan plan intended to help alleviate student loan debt in this country.

[refinance_student_loans_table]

Here are some of Clinton’s top proposals:

1. Refinance Student Loans

Clinton wants to enable 25 million borrowers to refinance their federal student loans to obtain today’s low interest rates and save on monthly student loan repayment. This is a great option for student loan borrowers with strong credit and income. Most private student loan lenders will refinance and consolidate both federal student loans and private student loans.

2. Moratorium On Student Loan Repayment

One central point of Clinton’s student loan plan is to offer a three-month moratorium on student loan payments for all federal student loan borrowers. According to Clinton, student loan borrowers would be able to “consolidate their loans, sign up quickly and easily for income-based repayment plans, and take direct advantage of opportunities to reduce monthly interest payments and fees.”

3. Enroll In Income-Based Repayment Plans

Clinton wants to move more student loan borrowers to income-based repayment plans. There are multiple types of student loan repayment and our Student Loan Repayment Guide walks you through all of them.

4. 10 Percent Income Limit: Student Loan Repayment

Clinton believes that a student loan borrower should not have to pay more than 10 percent of their income toward their monthly student loan repayment.

5. Term Limit: 20 Years

Clinton believes that student loan borrowers should not have their student loans outstanding for more than 20 years. For those who work in the public sector, student loan forgiveness would occur within 10 years.

6. Student Loan Repayment Benefits

Clinton wants to encourage companies to participate in the student loan repayment plans and student loan debt elimination in this country. Clinton believes that employers who help their employees pay off their student loan debt – which today total about 3 percent of all employers – should receive a tax deduction.

7. Entrepreneurship Student Loan Program

Clinton wants to encourage more entrepreneurship in this country, particularly to help boost the number of small businesses. Clinton would provide entrepreneurs with three years of loan deferment so they can focus on building their business. Social entrepreneurs in low income communities could qualify for up to $17,500 in student loan forgiveness.

8. Student Loan Forgiveness

Teachers and AmeriCorp participants should qualify for student loan forgiveness. AmeriCorp volunteers who complete two years of national service and one year in public service can qualify for student loan forgiveness. This proposal is more generous than the existing student loan forgiveness programs, namely the Public Service Loan Forgiveness Program and the Teacher Loan Forgiveness Program.

[related_posts post_1=’318′ post_2=’333′ post_3=’761′]

Refinancing student loans enables you to lower your interest rate, consolidate student loans and save money. And it only takes two minutes to see your new interest rate to determine if it is lower than your existing one.

In the U.S., there are more than 44 million student loan borrowers who hold more than $1.4 trillion in student loan debt. If you are a graduate of the Class of 2016, the average student loan debt is $37,172.

As a student loan borrower, you have multiple options to help alleviate your financial burden.

There are a lot of options for refinancing student loans and refinancing PLUS loans. So, let’s break down the basics into 5 key components that you should consider to help drive your decision.

[refinance_student_loans_table]

1. Interest Rate: Should I Choose A Fixed Interest Rate or Variable Interest Rate?

Your interest rate is one of the most important factors for your consideration when refinancing student loans. When considering an interest rate, though, don’t just choose the lowest interest rate. Why?

Variable interest rates are lower than fixed interest rates.

This is important in a rising interest rate environment because your interest rate will change over time as interest rates move up or down. When interest rates go up, your variable interest rate will increase. When interest rates go down, your variable interest rate will decrease.

If you think interest rates will not rise significantly in the coming years and have a shorter-term loan duration (e.g., five years), you could pick a variable interest rate.

However, if you are paying off your loan over a longer term such as 20 years, then a fixed rate may be a better option. With a fixed interest rate, your rate will never change (for better or worse) – regardless of movements in interest rates.

You can use the Mentor Student Loan Refinancing Calculator to calculate your potential savings when you refinance your student loans.

Lemonade Tip: Choosing an interest rate is a personal decision based on your personal and life goals. Don’t just choose the lowest interest rate. Think about your loan term and when you can and want to pay off your student loans. The sooner you pay off your student loans, the more you save in interest!

2. Loan Term: How Long Or Short Should My Loan Term Be?

When choosing a loan term, you should remember a simple rule: the shorter your loan term, the higher your monthly payment; the longer your loan term, the lower your monthly payment.

You should consider choosing a loan term that matches your personal and financial goals, and decide whether you can afford to pay off your loan as quickly as possible.

Lemonade Tip: The sooner you can pay off your loan, the less interest you have to pay. Think of it this way: each day you can pay off your loan faster is one day of interest saved that can be used to invest. That’s extra money in your pocket to save for a down payment, medical bills, a car payment, or a vacation.

3. Loan Amount: How Much Student Loan Debt Can I Borrow?

Loan amount, or the amount that you borrow, is directly connected to your monthly interest payment.

If you have medical school or pharmacy education loans, you may have a higher student loan balance. But that’s perfectly fine. Some student loan companies will allow you to borrow up to $500,000 and some lenders do not even have a maximum loan amount.

Lemonade Tip: Medical school and pharmacy school student loan borrowers are viewed favorably by many private student loan companies because they are viewed as stable, high income earners who can repay their student loans in full and have low default rates.

4. Do I Need A Co-Signer?

When you apply to consolidate and refinance your student loan, the lender will evaluate your financial profile, including your financial responsibility as well as income and expenses, and other criteria that may include your credit history and/or credit score.

If the lender decides you do not qualify for one of their loans based on their underwriting criteria, they may ask that you have a co-signer, which may be a family member, for example, that will assume financial responsibility for the loan if you are unable to pay.

The co-signer would have to meet the lender’s underwriting criteria, so it best to put forth a co-signer who has a strong credit profile. Some student loan lenders offer “co-signer release,” which means that once you are approved, the lender will release the co-signer from having any financial responsibility for your loan.

Lemonade Tip: You should consider applying to as many private student loan companies as possible to maximize your chances for approval. Most lenders can provide you an interest rate range for a loan within 2 minutes.

5. Can I Expect Stellar Customer Service?

It doesn’t have to be a headache to refinance student loans. While there is a lot of information out there that often times can seem confusing and complex, the last thing you need is a student loan lender with poor customer service.

The lender you choose should be available to answer all your questions (from student loan forgiveness to student loan repayment to student loan consolidation to student loan refinance), be responsive, and be patient.

Lemonade Tip: Many student loan lenders also offer additional benefits and goodies to be part of their private student loan refinance programs, so be sure to ask their customer service teams for those as well.

[related_posts post_1=’318′ post_2=’321′ post_3=’357′]

How many student loan refinance myths have you heard before?

Mentor readers regularly ask questions regarding student loans. Some of the most popular topics relate to student loan refinance, student loan repayment, student loan consolidation and student loan forgiveness.

Here are 5 popular student loan refinance myths shared by real student loan borrowers – as well as responses – that not only can help guide your path forward, but also save you time and money:

[refinance_student_loans_table]

Student Loan Refinance Myths #1: “I’m not going to apply to refinance my student loans because I don’t have an 800 credit score.”

You do not need an 800 credit score to be approved for student loan refinance.

Many highly reputable private student loan companies will refinance student loans with credit scores starting in the mid-600’s. Each private student loan company has its own underwriting criteria, which may include credit score, employment status and monthly cash flow, among other criteria. If you do not qualify on your own for student loan refinance, most companies will still refinance your student loans with a qualified co-signer.

A co-signer can be another creditworthy person (e.g., a parent, spouse, relative or friend supportive of your educational goals) to help you qualify for a student loan. A co-signer is equally responsible with you for the student loan obligation.

Plus, once you have been approved for a refinanced student loan or new student loan, your co-signer may not want to be financially responsible for your student loan. In this case, some student loan companies will release the co-signer from his or her obligations to repay the student loan.

Student Loan Refinance Myths #2: “I have been working as a public school teacher for 5 years and made all my student loan payments on time. Why haven’t my Sallie Mae student loans been forgiven?”

There are several misconceptions regarding Public Service Loan Forgiveness and Teacher-Student Loan Forgiveness.

The key point to remember is that you must have a federal direct student loan, Stafford Loan or consolidated loan that you borrowed from the federal government.

There are many examples of student loan borrowers who have believed for years that they made qualifying student loan payments on federal direct student loans only to learn later that their student loans were private student loans. You should confirm in writing with your student loan servicer what types of student loans you borrowed.

A student loan that you borrowed from a private student loan lender such as Sallie Mae is not eligible for student loan forgiveness.

PLUS Loans also are not eligible. Importantly, you have to apply for Public Service Loan Forgiveness and Teacher Student Loan Forgiveness (you are not automatically enrolled) and have to meet certain qualifications.

Student Loan Refinance Myths #3: “I already refinanced my student loans so I can’t refinance student loans again to take advantage of today’s low interest rates.”

The good news is that there is no limit on the number of times that you can refinance your student loans.

If you can find a lower student loan interest rate, then you can apply to refinance. There are no prepayment penalties on your existing student loans, and you should only apply to refinance your student loans with companies that do not charge an application or origination fee.

Student Loan Refinance Myths #4: “I can only apply to one lender for student loan refinance. Otherwise, applying to more than one lender will hurt my credit score.”

Not true. You should apply to multiple student loan lenders to maximize your chances for approval. Most applications take only two minutes, and you can check your new interest rate with only a soft credit pull (which does not impact your credit score). According to FICO, student loan “interest rate shopping” inquiries made during a focused time period (for example, 30 days) will have little to no impact on your credit score.

Student Loan Refinance Myths #5: “I don’t want to apply for student loan refinance because I don’t want to refinance all my student loans.”

You can refinance all or some of your student loans.

For example, if you have high-interest rate student loans, you may want to refinance these student loans only and not include your lower interest rate student loans.

The goal is to lower your overall student loan payments and save on student loan interest. The good news is that the choice is yours.

[related_posts post_1=’318′ post_2=’321′ post_3=’333′]