How to Choose the Student Loan Refinancing Benefits You Need

by | Jun 12, 2017 | Refinancing

Read this article if you’re looking to refinance your student loans but aren’t sure which borrower benefits you actually need.

Estimated read time 10 minutes.

Refinancing your student loans can slash your interest rates and save you thousands and even tens of thousands of dollars in interest. For those who qualify it’s a no-brainer. You can keep making the same monthly payment and see each payment get you closer to your debt free dream. There are a multitude of student loan refinancing companies out there. So how do you decide which company best suits your repayment style? This article will discuss the various borrower benefits offered by refinancing companies and describe the folks who need them.

Loan Forgiveness Upon Death

This is a borrower benefit attached to all federal student loans. Essentially if the borrower dies the remaining loan balance is forgiven. That means no one can go after your estate or living family members to get the money to repay the balance. Some refinancing companies offer this benefit while others will collect the money from your co-signers or estate. Most refinancing companies have insurance and will go to their insurance rather than dragging the money out of your living relatives.

Do you need to refinance with a company that offers loan forgiveness in the event of borrower death?

If you don’t carry enough life insurance to cover the cost of your funeral and end of life expenses (other debts) plus the cost of your student loan debt you should choose a company that offers the benefit of loan forgiveness upon borrower death. If something tragic were to happen to you it would make an awful situation worse by leaving your family to repay your debt.

Companies that offer loan forgiveness upon borrower death are: Earnest, DRB, RISLA, CollegeAve, SoFi, EdvestinU, and Citizens Bank.

Companies that don’t offer loan forgiveness upon borrower death or offer restricted loan forgiveness upon borrower death are ELFI, CommonBond, iHELP, and LendKey.

Flexible Monthly Payments

Federal loans carry many different repayment plan options. This gives borrowers maximal flexibility to adjust their payments to their financial situation. When refinancing student loans repayment plans are eliminated and you are left with the monthly payment and term of your loan as decided in your contract. Some refinancing companies offer the opportunity to reassess your monthly payment and change it if needed while others remain rigid and adhere to the terms of your loan.

Do you need to worry about the flexibility of your monthly student loan payment?

If you have unpredictable income you may be better off choosing a company that offers more flexibility. It should also be noted that unpredictable income is a reason to consider keeping federal loans instead of refinancing because federal loans offer the most gracious repayment plans and periods of forbearance for financial hardship.

Companies that offer the option to change your monthly payment are: RISLA, Earnest, and iHELP.

Periods of Deferment and Forbearance

Deferment is pausing monthly payments generally without the accrual of interest while forbearance is the ability to pause monthly payments while interest accrues. Generally when refinancing companies offer the ability to pause payments interest continues to accrue on the loan. Education related forbearance and deferment are attached to all federal loans. That means if you enroll at least half-time you’re able to pause payments on your student loans (interest accrues on unsubsidized loans).

Do you need to worry about being able to pause your monthly payments?

If you’re considering returning to school in a way that decreases your monthly income (i.e you stop working or drop down to part time) you need to be sure to refinance with a company that offers this benefit. It will come at a cost as interest will accrue in most cases throughout the period of paused payments.

Companies that offer the ability to pause payments for education are: Earnest, SoFi, CommonBond, Citizens Bank,

Companies that offer the ability to pause payments in the case of financial hardship are: Earnest, SoFi, CommonBond,iHELP, EdvestinU, Citizens Bank

What are the benefits you’ve got to have in order to refinance your student loans? Let me know in the comments below or on the Repayable Facebook page.

Additional resources

My $7,000 Student Loan Mistake

Student Loan Refinancing: A Millennial’s Guide to Earnest

How to Refinance if You’re a Pharmacy Resident

Eight Questions to Ask Student Loan Refinancing Companies

A note about the links to refinancing companies.

The links to the refinancing companies in this article are affiliate links. That means if you follow this link and choose to refinance your loan we will both get money. I want you to choose the company that makes the most sense for you and gives you the best interest rate while also meeting your benefit needs as a borrower.

 

Eight Questions to Ask Student Loan Refinancing Companies

Eight Questions to Ask Student Loan Refinancing Companies

by | Feb 6, 2017 | Money Matters, Refinancing

Refinancing student loans is a great way to make your money work for you by paying less interest. A lower interest rate means more of your payment goes to principal. This strategy gets you out of debt faster with no additional financial sacrifice on your part. So what’s the catch? It seems like it’s too good to be true, but it’s not, as long as you do your homework.

Remember, student loan debt is a 1.4 trillion dollar market. The companies that offer refinancing have a lot of money to make, even at interest rates lower than your federal rates. Refinancing companies also cherry-pick the best borrowers so they can take the least risk and earn the most money. The business model makes sense and fits the market.

Of the multitude of companies vying for your debt, how do you bring the best to the top? I propose emailing each refinancing company’s customer service department and asking the following questions.

How does your company protect my financial information and identity?

This question is there for your own peace of mind. You provide a lot of sensitive personal identity and financial information to these companies so you want to make sure they are diligent about keeping that information protected.

Are there any application fees or fees for early repayment?

Don’t pay these fees, ever. If a refinancing company has either of these, cross them off your list of options.

What borrower benefits does your company offer?

This is the goldmine of information. Many companies will have this information somewhere on their website but it’s helpful to get a succinct list. These benefits can be the tie breaker for companies offering similar refinancing rates.

After I refinance my student loans with you, will your company sell my loan to another company?

This question is important because you want your loan to stay with the same servicer so you get the same benefits you vetted them for in the first place.

What happens to my loan if I die?

Federal student loans are discharged (aka forgiven) if you die. However, that isn’t always the case with private lenders or refinancing companies. If you have a co-signer it’s likely they will have to repay your debt and perhaps the total bill all at once. This answer determines a lot of your financial planning. Essentially, if your debt will not be discharged upon your death you need a term life insurance policy to cover the balance.

An important note, if you or someone you know is in a crisis, whether or not you are thinking about killing yourself, please call the National Suicide Prevention Lifeline at 1-800-273-TALK (8255).

How are extra payments allocated?

You want to know if your extra payments are allocated to principal only or if they’re allocated to principal and interest. This isn’t so much a deal breaker as it is information you need during repayment. Some companies will have continuously accruing interest and your extra payments will first be applied to the interest that has accrued since your last payment.

What happens if I need to adjust my monthly payments?

This question gives you a sense of the companies flexibility with monthly payments. It’s important to know the steps you need to take in order to adjust payments in case that scenario arises. Many companies offer the ability to change your monthly payments if you need to. If you anticipate inconsistent monthly income this is a crucial question.

If market interest rates improve, can I re-refinance through your company for a better rate?

If the market interest rates improve dramatically it’s nice to have the option to lower your rate to match. On the flip side, if you choose a variable interest rate it’s nice to know if you can change to a fixed rate if the market interest rate starts to jump up. Follow-up questions to go with this include: “What are the requirements for re-refinancing and how do I do that?” and “Is there a fee for re-refinancing?”

The answers to these questions can help you confidently choose the best student loan refinancing company for your needs. For more reading on refinancing check out Refinancing as a Resident, Four Refinancing Disasters to Avoid, Three Surprises When I Refinanced, and A Millennial’s Guide to Earnest.

What’s keeping you from refinancing your student loans? Let me know in the comments below or on the Repayable Facebook Page.