Student Loan Refinancing
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How to Pay off Student Loans Fast
Managing Your Student Loan Debt
Parent PLUS Loan Refinancing
Why Parents Should Refinance Student Loans
How to Refinance Parent Student Loans
Parent’s Guide to Student Loans
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Applying for Student Loans Guide
Student Loan Process Checklist
Student Loan Refinance 101
Student Loan Glossary
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If you are one of the 43.4 million people with federal student loan debt, the last two years have been strange. On March 13, 2020, the government paused federal student loan payments and set interest rates to 0%. Thanks to numerous extensions, you haven’t had to make up payments since then, so you’ve enjoyed more money in your budget for other expenses or wants.
Continue reading to learn how to pay off federal student loans more easily in 2022.
If you don’t think you can afford your federal student loan payments, you’re not alone. In a 2021 Student Debt Crisis Center survey, 89% of fully-employed student loan borrowers said they weren’t financially ready for student loan payments to resume. They said that their loan payments would prevent them from affording other essential expenses like rent and medications.
If you can’t afford your payments, don’t panic — there are federal repayment options that could make your loans more affordable.
IDR plans are often the best way to reduce your payments and manage your debt. If you have eligible federal loans and apply for an IDR plan, your loan servicer will calculate a new monthly payment based on a longer loan term — 20 or 25 years — and a percentage of your discretionary income. Your discretionary income is calculated using the federal poverty level for your location and family size.
There are four IDR plans:
Although there are differences between the four plans, the good thing is you don’t have to know the ins and outs of how they work. On the IDR plan application form under question two, you can check the box for “Recommended: I want the income-driven repayment plan with the lowest monthly payment.” By checking this box, you’ll be automatically enrolled in the plan that gives you the smallest payment.
You can apply for an IDR plan online or by contacting your loan servicer.
[Tip: IDR plans are qualifying payment plans for Public Service Loan Forgiveness.]
If you owe $30,000 or more in federal Direct loans, you may qualify for an extended repayment plan. With this option, your repayment term is changed to 25 years.
Your payments can be fixed or graduated. If they’re fixed, you’ll pay the same amount every month for the duration of the loan. If they’re graduated, they’ll start off low, but automatically increase every two years — regardless of your income.
With a graduated repayment plan, your payments are initially reduced. Every two years, they increase, and your loans are paid off within 10 years (if you consolidate your debt with a Direct Consolidation loan, you can make payments for up to 30 years).
Income-sensitive repayment is a program only available to Federal Family Education Loan (FFEL) borrowers, and it doesn’t qualify for PSLF. Under this plan, your payments are reduced based on your income, but you’ll pay off your loans within 15 years.
Direct Consolidation is a tool you can use to combine your federal student loans into one. By consolidating your debt, you can extend your repayment term to up to 30 years. And, you may be eligible for more repayment options.
For example, Parent PLUS Loan borrowers aren’t eligible for IDR plans. But if they consolidate their debt with a Direct Consolidation Loan, they can become eligible for Income-Contingent Repayment and potentially reduce their payments.
You can apply for a Direct Consolidation Loan online.
If you lose your job, have a medical emergency, or have some other financial crisis, you may be able to postpone your payments through federal general forbearance. If you qualify, the loan servicer can pause your payments for up to 12 months at a time, for a maximum of three years over the life of your loan.
View the general forbearance request form for more information.
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One of the main perks of federal student loans is that some borrowers will qualify for loan forgiveness, meaning the remainder of their debt will be completely eliminated. The three available programs are:
PSLF is only for federal Direct loan borrowers that work for non-profit organizations or government agencies. You can qualify for forgiveness if you work for an eligible employer full-time for at least 10 years and make 120 qualifying monthly payments. Payments made under an IDR plan are counted as qualifying payments, even if your new payment is quite low.
PSLF is notoriously difficult to qualify for, so it’s important to do your homework and carefully follow the requirements. You can use the PSLF Help Tool to see if your loans and employment are eligible find out what forms you need to submit.
[Important: In October 2021, the Department of Education announced a limited-time opportunity expanding access to loan forgiveness for federal loan borrowers. Borrowers can temporarily get credit for past periods of repayment that otherwise didn’t qualify for PSLF, giving more people the ability to qualify for loan forgiveness.]
If you’re a teacher and work for five full and consecutive academic years in a low-income school or educational service agency, you may qualify for Teacher Loan Forgiveness. Eligible teachers can get up to $17,500 in loan forgiveness.
Under all four IDR plans, you can qualify for loan forgiveness if you have a balance at the end of your 20- or 25-year repayment term.
Previously, borrowers eligible for IDR forgiveness had to pay income taxes on the amount forgiven. However, that changed last year. In March 2021, President Biden signed a new coronavirus stimulus package into law. One of the provisions made student loan forgiveness tax-free, eliminating a formerly serious drawback of loan forgiveness.
The repayment and forgiveness strategies mentioned above can be helpful if you can’t afford your payments. But what if you make a comfortable income, and just want to pay off your loans faster? For borrowers that want to accelerate their repayment, student loan refinancing may be the solution.
Student loan refinancing is a process where you apply for a loan from a private lender for the amount of your existing federal or private student loans. You can refinance all of your debt or just a portion of it — it’s up to you.
Because you’re taking out a new loan, you could qualify for different terms than you have on your existing debt. For example, you could get a longer loan term or a lower interest rate.
Top refinancing lenders include:
[Tip: If you decide to refinance your loans and want to save as much money as possible, opt for the shortest repayment period you can afford. Lenders usually give the lowest interest rates to borrowers that select shorter loan terms, so pick one that is five to eight years in length.]
Student loan refinancing combines your current loans into a single loan with a new rate and term. See how much you can save by entering your loan information below, or by getting quotes from multiple lenders using Purefy’s rate comparison tool.
Lifetime Interest Savings
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If you have federal student loans, there are several advantages to refinancing your debt:
You can use the student loan refinance calculator to see how much you can save.
[Important: Federal loans are known for their low, fixed interest rates. But depending on when you took out your loans, your rates may be much higher than they are right now. Foe example, in 2019, the rates for undergraduate loans were 5.05%, while PLUS Loans were at 7.6%.]
Although student loan refinancing can be a helpful weapon in the battle against your debt, there are some substantial disadvantages to consider.
If you’re researching how to pay off federal student loans more easily, you may be wondering if student loan refinancing is right for you. Refinancing can be a smart decision, especially in the following scenarios:
One of the biggest drawbacks to refinancing federal student loans is that you lose eligibility for IDR, PSLF, or Teacher Loan Forgiveness. But if you don’t qualify for those programs — for example, if you earn too much money or don’t work for a non-profit organization — you don’t have to worry about losing that perk.
If you have a high loan balance and large monthly payment, it can be difficult to enjoy your life or plan for the future. Worrying about your money and making your payments on time can be immensely stressful and prevent you from achieving your goals.
By refinancing your loans, you could get a lower rate and pay off your loans much faster, eliminating that weight from your shoulders. How much of a difference could it make? Consider this example:
Ben graduated with $30,000 in student loans at 5.05% interest, and he has seven years left in his loan term. He decided to refinance his loans and, determined to get rid of them quickly, he applied for a five-year loan. The lender approved his application and gave him a 2.8% interest rate.
With a shorter loan term and a lower rate, Ben pays off his loans two years sooner, but he also saves over $3,400.
If you have federal student loans with high interest rates — in the past, the interest rates for graduate and parent student loans have been as high as 7.9% — it can feel like making progress is impossible. With such a high rate, interest can accrue rapidly, so even if you pay thousands of dollars, you may not chip away very much at the principal.
By refinancing your debt, you can ensure more of your monthly payments go toward the principal rather than interest. It will help you pay off your debt faster — and save money.
Molly has $50,000 in student loan debt from graduate school. Her loans are at 7.6% interest with a monthly payment of $596, and she has 10 years left to her loan term.
Molly refinanced her loans. She qualified for a 10-year loan at 4.5% interest, so her monthly payment dropped to $518 per month.
If she stuck to that payment for the duration of her loan, she’d save over $9,000. But because she qualified for a lower rate, Molly decided to tackle her debt aggressively. She kept paying the same amount she had paid before she refinanced — $596 — so she paid an extra $78 per month.
By making extra payments every month, Molly eliminated her debt in about eight and a half years. And, she saved over $2,000 more than if she had made the minimum payments on her refinanced loan.
Now that you know how to pay off federal student loans more easily through refinancing, you can start the process for yourself:
That’s it! You’re on your way to refinancing your debt and paying off your loans once and for all.
If you’re struggling with your debt and wondering how to pay off federal student loans more easily in 2022, you have many options available to you. If you want to keep your federal loans in their current state, you may be eligible for an alternative payment plan or a forgiveness program based on your employment. Or, you may be able to postpone your payments if you’re dealing with financial issues.
As soon as you realize there’s a problem, contact your loan servicer. By being proactive, the loan servicer will be more willing to work with you to find a solution.
If you won’t need the benefits of federal student loans or simply want to pay off your loans as fast as humanly possible, student loan refinancing could be the solution you’re looking for. You could get a lower rate, allowing you to pay off your debt faster and save thousands.
To get started, check out the options offered by the top student loan refinancing lenders.
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