If you’re like the 44 million other people with student loan debt, you know that having debt hanging over you can inhibit your goals. Student loans can cause you to put off marriage, new careers, or even homeownership. But your debt doesn’t have to hold you back; it just takes a little extra work to get around it.
If you’re looking to get a mortgage or take charge of your debt, lending companies will likely ask you for a statement with your payoff balance. This is called a payoff verification statement and is necessary to get a loan or credit for big purchases. Find out why the statement is such a big deal and how you can get one.
What is a payoff balance statement?
A loan payoff letter is a document that you get from your loan servicer for both federal or private student loans. The statement shows you what is the payoff amount, your monthly bill obligation, and your account information.
You need this loan payoff letter to complete the process for several different tasks, including buying a home or repaying your loans. Here are three times you need a payoff balance statement for your student loans.
1. Getting a mortgage
When you start looking for a home, your debt-to-income (DTI) ratio plays a major role. Your DTI ratio is a calculation of your monthly debts compared to your gross income. Lenders look at it to determine whether or not you could afford your monthly payments if they gave you a mortgage loan.
Having student loans raises your DTI ratio and can make lenders nervous. A high student loan balance could ruin your chances of getting a mortgage at all.
When you apply for a mortgage with student loans, most companies will ask you to submit a payoff verification statement that shows how much you owe and what your monthly payment is. If you will repay your loans before your mortgage kicks in, having a letter that shows your expected payoff amount can help make you a more attractive borrower.
2. Paying off your loans
If you are ready to be debt-free and want to pay off your loan balance in full, you need to request a payoff balance from your loan servicer. Interest continues to accrue on student loans, so the letter is a quote of how much you need to pay to close out your loan. That amount is only valid for a specific timeframe after your servicer issues it.
If you pay the amount listed in the letter after the specified timeframe expires, you may have to make an additional payment later once the interest charges are added on. It can be frustrating to think your loans are paid in full only to find you owe more money. In addition, if you don’t monitor the account and don’t realize you still owe money, you could end up delinquent on your loans.
3. Refinancing your debt
For borrowers looking to save money and take charge of their debt, refinancing your student loans makes smart financial sense. You take out a new loan with a lower interest rate or reduced monthly payment and pay off the old loans in full. Over time, this can save you thousands in interest.
However, you need to contact your current loan servicer before you can refinance your loans. Your servicer must send you a payoff verification statement with the current balance of your loans so you can submit it to the refinancing company. The letter tells them how much money they need to pay your old servicer to refinance the debt.
How to get a payoff verification statement
To get a payoff letter, borrowers must contact their loan servicers and request it. Here is the information for some of the most common loans:
American Education Services
- Visit AESSuccess.org and enter your login information
- Under “Account Summary,” select “Payments and Billing”
- On the left, select “Loan Payoff”
- Enter the date of when you want the loan paid off
- Choose “Select a Payoff Quote”
- Print or save the quote
- Visit MyGreatLakes.org and login
- On the top navigation bar choose “Payments”
- Select “Manage Payments”
- Select “Calculate Payment Amount”
- Use the “Choose Payoff Date” field to select the desired date
- The site will bring up your 30-day payoff quote
- Save or print the quote
- Visit MyFedLoan.org and login
- Under “Account Summary,” click on “Payments & Billing”
- Choose “Loan Payoff” on the left
- Select the loan that you want to request a payoff quote for
- Choose your date
- Select “Request A Payoff Amount”
- Save or print version of each page
Managing your loans
Handling your student loans when you’re trying to achieve your other goals can be difficult. Whether you’re looking to buy your first home or want to refinance your loans to save money, requesting a payoff balance statement is an essential first step.
For more information on managing your debt, find out how you can pause your student loan payments.
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