Thinking about taking out a student loan? It’s a big decision, but don’t worry, we’ve got you covered with some essential things to keep in mind. As the cost of education keeps skyrocketing, many students turn to a student loan as a way to finance their education tuition. Private student loans can bridge the gap between what your education costs and the funds you have available. So, let’s dive in and explore what you need to consider when it comes to private student loans.

Interest Options: When it comes to interest rates, you’ve got plenty of options! Student lenders offer fixed rates that provide stability and predictability in your monthly payments. On the other hand, variable rates fluctuate over the life of the loan. It’s up to you to decide which suits your needs better.

Flexibility with Deferment: Full-time students, rejoice! Some private student lenders offer deferment options, meaning you can delay the start of making payments while you focus on your studies. Check each lender’s website or reach out to their friendly customer service team to learn more about the deferment options available. You’ll have the freedom to select a repayment plan that works best for your unique situation, whether it’s in-school deferment, full payment, or an interest-only payment.

Support When You Need It: Student lending companies with a dedicated customer support team are lifesavers. Look for lenders who are available when you need them most and, most importantly, who offer real human representatives to assist you with your questions and concerns. Your peace of mind matters!

Discounts to Save You Money: Who doesn’t love saving money? Some student lenders have fantastic programs designed to lower the overall cost of your loan. They might offer an auto-pay option, where you can set up automatic payments and enjoy a predetermined percentage reduction in your interest rate. Additionally, certain lenders take more than just your credit score into account. They consider your academic or military records to reward you with lower rates. It’s worth exploring these money-saving opportunities!

Credit Checks Made Easy: We know your credit score matters. That’s why finding student lenders who provide loan offers with a soft credit pull is a game-changer. With a soft credit check, you can receive a loan offer without worrying about it negatively impacting your credit information. This way, you can freely explore your student loan options without any concerns.

Hassle-Free Applications: Time is precious, especially when you’re a busy student. That’s why it’s crucial to find student lenders with user-friendly applications that make the process quick and stress-free. After all, you want to receive your loan options efficiently and get back to focusing on your studies!

By considering these factors, you’ll be well-equipped to make an informed decision when exploring student loans. Remember to carefully review the terms and conditions of any student loan offer and compare multiple lenders to find the perfect fit for your financial situation and goals. Good luck on your educational journey!

 

 

Resources

https://www.nerdwallet.com/article/loans/student-loans/fixed-variable-student-loan

https://studentaid.gov/manage-loans/lower-payments/get-temporary-relief/deferment

https://www.sparrowfi.com/blog/how-to-save-thousands-on-student-loans-with-an-autopay-discount

https://www.elfi.com/whats-the-difference-between-hard-and-soft-credit-checks/

Choose Wisely for Financial Success

By Paula Raven, Director of Operations, Meritize

 

When students consider getting a private educational loan, many do not understand perhaps the most important thing to consider – repayment options.  When choosing a loan, students generally have three repayment options – full deferment while in school, interest-only payments, and full payments while in school.  Each of these repayment plans give students a different way to manage their finances, both now and in the future, and what is best for one person may not be best for another so it’s important to understand how each works.

Before we explore these options, let’s talk about how your interest is calculated. When you take out a loan, interest is charged each month on the principal (the original loan amount) usually starting from the time that funds are applied to your school account.  Thus, your decision about when to start paying and how much you want to pay has a huge impact on the overall cost of your loan.

Fully Deferred payments

This option allows you to hold off paying anything on your loan until after you have graduated (or left school), plus any grace period that may be given. All interest is accrued during your school tenure and added to the principal part of your loan after the deferment period. This option is popular because many students like the idea of not having to pay while in school when their incomes may be strained.

Interest-Only Payments

With this option, you’ll be required to pay only the monthly interest charged on the principal balance, and you’ll pay on the principal amount after you graduate. While you’re in school, the principal balance will remain the same because you are paying the interest that accrues. After you graduate, and following any additional grace period your loan allows, you’ll begin full loan payments, which will include both interest and principal.  The benefit of this option is that it keeps your monthly payments low and affordable until you can work full time and pay off your loan.

Full Payments While in School

With this option, you’ll be required to make full payments during your time in school, paying the interest as well as part of the principal. The benefit of this option is that it cuts down on the overall “cost” of the loan since the principal balance will go down with the very first monthly payment and continue to reduce as you go through school. Of course, many students cannot afford to start paying their loans before getting a full-time job in their chosen profession. So, if you choose to hold off paying the full interest and principal on your student loan, you’re not alone by any measure.

What does this look like in real terms? Let’s use an example of a $10,000 loan. For ease of understanding, we’ll use an interest rate of 10% and a term of 10 years.  Let’s assume the student will be in school for 11 months and have a grace period of three months after graduation to find a job. Here is what the same loan looks like with the three different repayment options.

Repayment Option		Monthly Payment	Interest Accrued During Deferment	Time to Repay	Total Cost of the Loan
Fully Deferred Payments		$148	$1,167	134 months	$17,708
Interest-Only Payments		$83/$132	$0	134 months	$17,025
Full In-School Payments		$132	$0	120 months	$15,858

 

This illustrates the benefits of paying your loan down as fast as your situation will allow.  Which brings us to the point of required versus optional payments. If you re-read the descriptions for the fully deferred and interest-only options, you will note the word “required” comes up in terms of the minimum you must pay. There are required payments, but that shouldn’t stop you from making additional payments whenever possible.  Payments above and beyond required payments will shorten the length of time to pay off the loan, reduce the overall interest accrued and, as a result, further reduce the total cost of the loan. That’s a good thing.

So even if you fully defer your payments, you can still make some small payments, which will benefit you financially in the end.

Whatever repayment option you choose, make sure you understand the terms of your loan very clearly so that you know what you have to pay and when you have to pay it.

Communication is Key to Successful Student Loan Repayment

By Phillip Stegner, CFO, Meritize

 

Once you’ve signed the promissory note for your student loan and you’re off to the races, what’s next? Who do you turn to if you have questions about your loan?

Many borrowers view their servicer – the company that will be taking your loan payments – as a faceless entity that simply sends statements, but a good servicer is much more. Good servicers have every incentive to help you be successful. They want to assist by providing information, guidance and even options if you have problems with your loan.

We asked the servicer with which Meritize partners, the Higher Education Servicing Corporation (or “HESC”), for their advice on working with student loan servicers. Here are a few of the most common questions they deal with to help you when navigating similar waters in your own student loan journey.

• “When do I begin making payments on my loan?”
  A good servicer not only knows the date you’ll complete your program, but they know precisely, to the day, when you’ll need to start making payments. While you’ll receive letters from your servicer a few months in advance of this date, don’t wait until the last minute to nail this down when you’ll have other things on your mind, like moving to a new town or landing that first job interview. You should contact your servicer well in advance – at least a few months – of your graduation date to learn more. Make sure you have in writing the payment due dates and amounts so there is no misunderstanding on your part.
• “Do I have to make payments via check?”
  While your first servicing letters and statements may come via mail, that doesn’t mean you need to haul out the old checkbook or hunt down that last stamp every time you make a payment. Most lenders offer a variety of payment options, including online and pay-by-phone, all of which they’ll gladly walk you through when you reach out.
• “I’ve recently moved. How do I continue getting statements?”
  Don’t wait until after you’ve moved to contact your servicer. Most prefer to work with you before you move to ensure there’s absolutely no confusion for you or them. Before you start packing up the boxes and loading up the van, reach out to your servicer to bring them up to speed on where you’re headed and when you’ll get there.In today’s digital age, most servicers use a variety of tools to communicate with you and let you communicate with them – from physical mail, to phone calls, to texts, to emails and online tools, including change of address updates. You should contact your servicer if you intend to change any of your primary contact information – from your mobile phone number to the email address you check most often and, of course, your physical home address.
• “I’m afraid I won’t be able to make next month’s payment. What do I do?”
  There may come times in your life when making payments on loans (student loans or otherwise) may be difficult. Maybe you’ve lost a job, or a family member needs urgent medical care. Maybe you live in an area impacted by a natural disaster. Or maybe money is simply tight and you need help thinking through your options.Don’t panic, and don’t wait – call or contact your servicer immediately. While it may seem counterintuitive to ask the company sending you statements for assistance, a good servicer has every incentive to help you through the tough times. Oftentimes, your servicer will have a number of valuable options they can make available to you, from alternative repayment plans to temporary payment suspensions, that will provide some much-needed relief as you get back on your feet.
• “I’ve graduated but would like to go back to school again. What happens with the student loans I have today?”
  If you decide to go back to school for a graduate degree or to complete your bachelor’s degree if you stopped short, you should reach out to your servicer to see what payment options might be available to you. Many lenders offer some sort of payment reduction plan or consolidation option if you go back to school. The key is to keep them updated with your plans so they can work with you on the best solution for your loan amounts and timing of your continued education.

The above is true for other life changes as well. If you’re in the military and are about to be deployed, for instance, let your servicer know – there may be payment reduction or suspension options available to you.

In addition to working with you for successful student loan repayment, a good servicer can also offer basic financial assistance. Have you received a debt consolidation solicitation and want to talk it through with an expert? Maybe you’ve gotten a phone call or letter about a debt relief offer that sounds too good to be true? Or you’re simply eyeing that next big purchase and want to understand your remaining student loan payments so that you can plan for your dream item.  A good servicer can walk through all of this and more to help you be financially successful.

Paying your student loan is no joke, but there is a punch line here: Whatever your situation, whatever your question, communicate, communicate, communicate with your servicer when you need assistance with your student loan. Get to know them, and, if they’re one of the good guys, they will be ready and willing to help you to ensure smooth sailing for your student loan.

Protecting Yourself With the Facts
By Paula Raven

When looking into college, most people talk to you about how to get the money to fund it – scholarships, federal student loans, private student loans.  But maybe the bigger focus should be on the cost/benefit of going to school.  Will the cost of the school or training program be more than you can afford after you graduate?

Warning:  This blog post contains *gasp* MATH. I will try to be clear so you can follow along and use these ideas for your own calculations.

1. Be clear on the cost of your education.

First, you need to know how much your education is going to cost.  I am going to estimate that a four-year college will cost $70,000 to get a bachelor’s in English – approximately $17,500 a year for four years. You can typically find out the cost of individual schools by looking at that school’s website.

2. Be realistic in your anticipated salary.

Second, you need to understand how much someone straight out of school makes in your intended field.  I use the website www.salary.com which is a great resource for this.  You can look up the job you want and the place you want to live.  Make sure you’re realistic with your job and salary prospects. You are not going to be a Director at a publishing company straight out of college or get a communications job in AnyVerySmallTown, Idaho. For our example, I amusing the position of copy editor position in Chicago, IL.  According to salary.com, a beginning communication editor in Chicago makes between $39,500 and $69,500 a year.  I will take the midpoint of that and use the average of $50,000 for our example.  Be aware that you may not get the ideal position in your field straight out of college, so you should be realistic with your expectations.

3. Calculate your monthly income and your student loan payment.

Now you need to calculate how much your monthly payment will be on your loans.  You can use several different online calculators for this, like this one from Wells Fargo. https://www.wellsfargo.com/student/calculators/alternative/.If you have $70,000 in loans at a rate of 7 percent with a term of 10 years, your payments will be $812.76 a month.

With a yearly salary of $50,000, and assuming you’re single in Chicago, your monthly gross income will be about $4,166 before taxes. You may want to manually subtract taxes, health insurance, and 401k deductions to get an even clearer picture of your monthly “net” take-home pay..  Although I did not use them in my example, experts agree you should take advantage of these benefits programs if offered by your employer.

4. Find the right balance.

A good rule is that your student loan payments should not be more than 20 percent of your monthly gross income.  This ensures you have the ability to pay other bills with enough left over for some fun.  So, in this example, 20percent of $4,166 is $833. Your illustrative loan payment is $812.76.  This is tight, but you are good to go and still within acceptable range.

But…

What if you went to a private school instead of a state school,or had to attend school longer and had loans which totaled $100,000?  Keeping everything else the same (interest rate and payment term), your monthly payment would be $ 1,161 a month.  You may think that you would still be OK with a payment of $1,161 since you would have over $3,000 a month left, but considering taxes (average tax bracket for young professionals is 25 percent of income- www.bankrate.com) and rent (which averages $1,600 a month in Chicago – https://www.rentjungle.com/average-rent-in-chicago-rent-trends/), car payments, food and other expenses, you’ll have little left over for an emergency or even a night out with friends.  You may be able to do this for a month, but you cannot sustain that tight of a budget.  Again, you should budget your student loan payment to be less than 20 percent of your expected salary.

Knowledge is protection.

Whether you are just starting on your college path or coming to the end, you’ll want to assess where you will be financially after graduation, checking these calculations to make sure you are still on track.  Also, if you want to continue your education past your undergraduate degree, these calculations can help you determine if you can afford the program you are interested in and/or estimate how much you will need to save instead of financing the entire cost of your education.

It is always better to know what your finances look like.  Now and for the future. Information is power, and knowledge is protection.