Refinancing with Earnest
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You want to start a family, but there’s something holding you back: your student loan debt. Like many people, your debt makes you feel financially unprepared for parenthood.
Millennials are having children later than previous generations. One likely reason for this is student debt. About 28 percent of young adults ages 21 to 35 say student debt has forced them to delay major life decisions such as starting a family, according to a Study.com survey.
It’s important to be financially prepared to have a baby, which includes responsibly managing student loans. Student loans don’t have to put your plans on hold. Instead, read on to learn how to manage student loans and create room in your budget for a baby.
How to manage student loans and prepare for parenthood
1. Pay extra on your student loans
If you can afford to, work on paying off your student debt entirely. Parents-to-be with higher incomes, lower loan balances, or other low costs of living can afford this strategy. If you have money left over each month after paying bills and necessities, devote that to paying off student loans.
If you don’t already have a monthly surplus, try to create one. Revisit your budget and look for opportunities to economize. Find the items you’re either overpaying on or can skip altogether, and scale back. Then apply those saving to paying off your student loans.
Maybe you can’t pay off all of your student debt but your extra payments would be enough to take out one of your student loans. Target the balance with the highest interest rate first to save you the most money over time. Or, you can try to repay the lowest balance first and easily knock out that monthly payment to free up some cash flow.
Here’s a look at this principal in action: Say you have three more years left on a $12,000 student loan and you pay $355 a month on this debt. But you know you’d like to have a child much sooner than three years — maybe in the next year and a half.
If you can round your monthly payments up to $500 a month (an extra $245), this student debt will be gone in 1.8 years instead of three. You’ll save $312 in interest and free up that $355 a month to help cover baby expenses.
See how these extra payments will affect your repayment period and interest with the student loan payoff calculator below.
2. Refinance your student loans
Maybe you can’t get rid of your student debt without waiting five years or more to start a family. If you otherwise feel ready to have a baby, you need to figure out how to manage student loans now.
For many borrowers, especially those with higher interest rates, keeping up with interest charges is the biggest pain point of student debt. It can feel like you’re barely keeping up with interest, let alone getting ahead on your student loan balance.
However, refinancing student loans can be a way to get a better interest rate before paying off your student loans. The best student loan lenders for refinancing offer interest rates as low as 1.95% APR.
Refinancing to a cheaper interest rate will lower your monthly payments right now by decreasing your interest charges. You can also choose a longer repayment period to lower monthly payments even further.
Note that refinancing student loans will have some drawbacks, such as losing out on federal student loan repayment options and protections. You’ll also need a higher income and good credit to qualify for favorable rates.
3. Get on an income-driven repayment plan
If refinancing isn’t the right choice for you, an income-driven repayment (IDR) plan is another option. Instead of figuring out how to manage student loans with high payments, you can reduce your monthly payments according to your income instead.
An IDR plan will set your monthly payments to match your income and expenses, rather than your student loan balance. This can make a huge difference if you have a high student loan balance or a low income relative to your payments. IDR plans even offer forgiveness of remaining balances after 20 to 25 years of payments, depending on the specific plan.
Enrolling in an IDR plan ensures that you can afford both student loan payments and a baby. It will also free up funds for important preparations to have a baby, such as saving for hospital and parental leave costs.
4. Ask for help managing student loans
The prospect of grandkids can be a great motivator for your parents to help you tackle your student loans. Consider asking your parents for help repaying student loans — but first, make sure they can afford to help without setting their own financial goals back. You don’t want it to affect their finances negatively or delay their retirement.
Parents can contribute to your student loan payments in several ways. They can make a lump payments to knock out a student loan or add to your monthly payments.
If paying your loans isn’t an option, parents can still help by cosigning on student loan refinancing or offering an interest-free family loan to repay your student debt. You can even ask for non-financial help to repay student loans, such as free child care once your baby arrives.
Before becoming a parent, repaying student loans might have been the biggest financial commitment you’ve ever made. But when you become a parent, you’ll be responsible for every cost of your child for at least 18 years.
Take parenthood seriously now and prepare yourself, your finances, and your student debt for having a family.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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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 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% 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 firstname.lastname@example.org, 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
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
|2.57% – 6.98%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.80% – 6.22%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.57% – 8.17%6||Undergrad & Graduate||Visit Citizens|