Refinancing with Earnest
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Tina MacDonald and her husband wanted to help their son get the best education possible, so they took out Parent PLUS Loans to pay for college. However, doing so caused them to rack up over $150,000 in debt.
With a high interest rate, the loans forced them to delay other goals, such as saving for retirement. “We were able to afford our monthly payments [on the loans], but we knew we weren’t putting away enough for ourselves,” says Tina.
With two other children, Tina also needed to free up money to help them with their education. In her search for possible solutions, Tina heard about student loan refinancing and thought it sounded like a good strategy to pay off the debt.
But finding a lender willing to work with them was difficult, despite their high income. Find out how Student Loan Hero was able to help Tina take charge of her loans.
Borrowing money to pay for her children’s education
Tina’s son chose a private school for college. Although it was a great school, it was expensive. He took out his own loans but needed help to cover the rest, so Tina and her husband offered to take out loans to pay for the remaining balance.
To cover tuition and other fees, Tina took out a total of about $140,000 in Parent PLUS Loans. Unfortunately, they came with a high interest rate of 7.90%.
“After five years, [the loan balance] grew to over $150,000,” Tina says.
The monthly payments on the loans were huge, so Tina opted for a graduated repayment plan — where payments start small and increase every two years — to reduce the monthly payment.
At first, the payments were manageable, but they increasingly became difficult. By the time she started researching other options to manage her debt, her monthly payments were $1,835.
“At the time [I considered refinancing], we had been through two increases already,” she says. “In a few years, [the payments] would have been insane.”
Looking into student loan refinancing
With such a large payment, Tina worried about saving enough for retirement and her other children’s education. She began researching options online.
“I’ve always been kind of interested in finance, and I’ve always handled the mortgages and the insurance,” says Tina. “Over the past couple of years, I had been thinking about [refinancing my loans].”
During her research, she came across Student Loan Hero and signed up for the weekly newsletter. She learned about how refinancing works with Parent PLUS Loans and how it could potentially help her.
“It was a big decision and I was afraid,” says Tina. “That interest was crazy. But I kept thinking about that pending increase [with the graduated repayment plan]. My payments would have been over $3,600 a month.”
Despite the benefits of refinancing, Tina was nervous about giving up the perks that come with federal loans.
“The only thing that frightened me is that when my husband was laid off a few years ago, we were able to put our payments on hold,” she says. “It was a big deal to give that option up.”
However, Tina decided to pursue refinancing despite the possible drawbacks of refinancing federal student loans.
Finding a refinancing lender
Tina looked at our list of six refinancing lenders and ended up applying to four of them. Initially, she worried that the loans were too big to refinance all at once, so she applied to have just half of the loans refinanced.
Tina and her husband are in their late 50s and make over $300,000 per year. Although that would make them sound like ideal applicants on paper, two lenders denied them.
“Even though we’ve never been late on a payment, we were denied because we never finished college,” she says. “They wouldn’t consider us because we didn’t have a degree.”
Thankfully, she did find a lender willing to work with her and the full balance of her loans: SoFi. After completing the application online, she received an approval notification just a few hours later.
Even better, the new loan would have an interest rate of just 5.50%. With the new rate and loan term, Tina no longer has to worry about the payment growing.
“My payments are just under $1,800, but they’ll never change [like they would with a graduated repayment plan],” she says.
With more wiggle room in her budget, Tina feels more secure. “A lot of people are afraid of financial things and don’t take action,” she says. “But you can save so much money by doing it.”
Tackling your own student loans
By refinancing her loans, Tina was able to lock in a monthly payment she could afford, freeing up money to put toward her other goals. That extra cash flow will go a long way in helping her other children pay for school and for her own retirement.
For some families, Parent PLUS Loans are a serious burden. They can affect your monthly budget, your ability to get a mortgage, and even how much you can save for retirement.
If you took out loans for your child’s education and want to reduce your payments or pay off your loans faster, see if refinancing Parent PLUS Loans could benefit you.
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 6.23% 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
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
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||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|