Refinancing with Earnest
Refinancing rates from 2.47% APR. Checking your rates won’t affect your credit score.
You have your engineering degree, you have your job… and now you have to start paying back your student loans.
Wait, being saddled with debt for the next 20 years wasn’t part of your plan? Well, if you play your cards right and use your income wisely, you’ll get out of debt a lot sooner.
Here’s what you do.
Get a handle on your engineering student loans
1. Optimize your payments
The best thing you can do for your engineering student loans is to optimize your payments right away. That way you can ensure that more of your money is going straight to your balance rather than interest.
Lower your interest rate
The first step in battling interest is obvious: pay less of it. You can make this happen by refinancing your student loans.
When you refinance your student loans, you’re applying for a new loan for a better interest rate or better repayment terms. But going for the lowest interest rate is how you can pay your debt off faster.
One thing to be aware of is that refinancing federal loans converts them to private loans. That means you’ll no longer have access to things like federal forbearance, deferment, forgiveness, or income-driven repayment plans.
Regarding engineering student loan forgiveness, there aren’t as many options as there are for other professions, such as those in health care.
However, you may be eligible for student loan forgiveness for engineers if you work for a qualifying non-profit and have your loans forgiven through Public Service Loan Forgiveness.
Another option for student loan forgiveness for engineers is if you opt to teach instead of work as an engineer full-time to qualify for Teacher Loan Forgiveness.
Finally, you can try to find engineering student loan forgiveness in your state, especially if they offer forgiveness for STEM degrees. For example, The Alfond Foundation is set to help pay the debt of college graduates in STEM fields who commit to working in these fields in specific companies in Maine. North Dakota has a similar program. Do some research on your state or the state in which you work to see if some such program exists – these types of things aren’t often widely advertised.
If these forgiveness options don’t apply to you and you’ve secured employment at a company that looks like it will stand the test of time, then refinancing to private loans might not be a concern.
But if you’re founding a company or joining a startup, it might be more of a risk to give up the options that come with federal loans.
After you’ve secured your best interest rate – or even if you chose not to refinance – the next best thing for you to do is start making payments on your loans biweekly instead of monthly.
Here’s how you pay biweekly:
- Split your monthly payment in half.
- Make your half payment every other week.
- Ensure that your first two half payments are made before your next due date.
- Read your statement online to make sure your servicer is applying them correctly.
The reason this subtle change to your payments makes a difference in your debt payoff is that there are enough weeks in the year that biweekly half payments lead to one full extra payment per year.
Remember, any extra payment can go a long way. When I tried this biweekly payment method myself, I found I could save approximately $2,000 in interest and shave one and a half years off my total repayment. All it took was making one simple change.
Bonus: if your employer pays you biweekly, you can automatically deduct your half payments from your paycheck.
As for making sure your payments are applied correctly, this step is crucial. Some student loan servicers will hold extra payments until the next due date rather than apply the extra to the principal balance.
You can make sure this isn’t happening to you by reviewing the way your payments are applied online or calling your servicer to make sure they’re being applied correctly.
2. Create your target payoff date
Once you’ve optimized your payments to make sure as much of your money is going to the balance as possible, the next step is to set a target payoff date.
Sure, you could skip this step and just pay off the loans along with the repayment plan. But doing so could cost you big.
Use your salary to beat the date and save on interest
If you want to get the most out of your earnings, figure out a date you want to be finished paying your debt by. There are a few ways to think about setting your target date:
- Choose a target date based on the maximum amount you can afford to pay each month.
- Decide on a payoff date based on the maximum amount of years you’re okay with being in student loan debt.
- Think about another goal you want to reach and pick your date based on when you want to reach that goal.
Once you’ve picked a target payoff date, it’s time to do some calculations. You can use this Payment calculator to help.
Track your progress
Setting a goal usually works best if you track your progress. After all, you make what you measure.
The good news is technology is on your side here. There are tools and apps that can help you track your student loan debt payoff progress.
A fan of measurement myself, here’s a screenshot of my progress chart using the Student Loan Hero dashboard.
To be honest, I’m not thrilled with my numbers here. Considering the fact that I’ve been paying these loans for more than ten years, I wish I was a lot further along. But I never bothered trying to pay my loans down faster than my original date. So, this is what I get for that.
Now, look what would happen if I were to switch gears and decide I want to pay the remainder of my debt in five years.
My monthly bill would nearly double, but the amount I’d save in the end is not trivial. If I were to follow my current plan, based on the calculations below, I would pay $28,072 in interest overall.
Going down to a 15-year plan, I’d only pay $20,377 overall – a $7,695 savings. That’s money that I could invest instead.
See why creating and tracking a plan can be so effective?
3. Prepare for life after student loan debt
Staying motivated is one of the hardest things about student loan debt repayment – especially if you’re trying to get out of debt faster.
As you dig into your career, there are going to be so many happy hours, lunches, and other activities way more fun and exciting than accelerating your debt payoff. But if you stay focused and keep your eye on the prize, you’ll save a lot more money in the long-run.
That’s why you should start thinking about what that life looks like now. Is it buying a house? Developing a career as a digital nomad? Maybe it’s going into a startup accelerator and building your own business.
Whatever it is you’re dreaming of, get ready for it now, so you don’t lose sight of your ultimate goal.
Put your income to good use with a spending plan
No matter how good your pay, if you don’t have a spending plan, you’re probably wasting money. Remember you make what you measure? That works for money management too.
Developing a spending plan is a great way to put your income to good use. And it doesn’t imply that you can’t have fun with your money. You worked hard to get your degree and land your job – you should have some fun! But not so much that you spend every dollar you earn unchecked.
Think of it this way. A spending plan can help you maximize your earnings by giving every dollar a job. Rather than spending freely, you can decide how much of your money you want to go to savings, entertainment, technology, and so on.
And if you start budgeting now, you’ll be way ahead of the game compared to most. According to a U.S. Bank study, only 41 percent of Americans follow a budget. That same study showed that 52 percent are concerned with their finances.
Imagine how many future money challenges you could avoid if you take the time to learn to budget now.
Start investing ASAP
Here’s another fun fact: The sooner you pay off debt, the more money you’ll have to invest. And that means your money can scale beyond the limits of what you can save from your salary.
If your company offers a 401(k) with a match, then there’s no need to wait. And if you’re currently not taking advantage of your employer match on a 401(k), then you’re just throwing away free money. Go ahead and contribute as much as your match so you can at least get that covered.
Last year’s Economic Policy Institute’s report on retirement shows that “nearly half of families have no retirement account savings at all.” So if you get that match now – or open an IRA if your employer doesn’t offer a 401(k), then you’re already ahead of many Americans.
Retirement might feel about a million years away now, but it’ll creep up faster than you think.
Pay engineering student loans faster so you can grow your money
If you’re wondering why there’s so much emphasis here on paying your debt off faster, it’s because doing so will free up your money for investments and growth. Not to mention, you can more quickly stop losing money to interest.
It’s all about making sure you get the most bang for your buck.
(TL;DR: Refinance to lower your interest rates, pay biweekly to make faster progress, make a goal and track your movement to it, and get out of debt faster so you can invest and grow your money beyond your pay.)
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.48% – 6.25%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|