How To Decide If Student Loan Refinancing Is Right For You
Student loan refinancing is when you take out a new loan to repay your existing debt on better terms, such as a lower interest rate. Some student loan borrowers may be able to reduce their monthly payments or pay off their debt faster by refinancing.
That being said, student loan refinancing isn’t right for everyone. For example, refinancing your federal student loans into a private loan makes you ineligible for income-driven repayment plans , COVID-19 emergency forbearance and select student loan cancellation programs like Public Service Loan Forgiveness .
But if you don’t plan on taking advantage of these government benefits or if you have private student loans that don’t qualify for federal aid then refinancing may help you save money while you repay your student loan debt. A recent Credible analysis found that well-qualified borrowers who refinanced to a shorter loan term were able to save nearly $17,000 in interest charges.
What Is Financial Aid
Financial aid is any college funding that doesn’t come from family or personal savings or earnings. It can take the form of grants, scholarships, work-study jobs, and federal or private loans. Financial aid can be used to cover most higher education expenses, including tuition and fees, room and board, books and supplies, and transportation.
Aid can come from a variety of sources. This can include federal and state agencies, colleges, high schools, community organizations, foundations, corporations, and more. The amount of financial aid you receive will depend on rules set by the various sources as well as federal, state, and university guidelines.
Student Loan Forgiveness: Which Loans Are Eligible
Only direct loans made by the federal government are eligible for forgiveness. Stafford loans, which were replaced by direct loans in 2010, are also eligible. If you have other federal loans, you may be able to consolidate them into one direct consolidation loan that would make you eligible. Non-federal loans do not qualify for forgiveness.
In 2020, borrowers with federal student loans who attended for-profit colleges and seek loan forgiveness because their school defrauded them or broke specific laws were dealt a setback when former President Trump vetoed a bipartisan resolution that overturned new regulations that make it much more difficult to access loan forgiveness. The new, more onerous regulations went into effect on July 1, 2020.
In 2021, under the Biden Administration, the Department of Education canceled a total of $1.5 billion in student loan debt for nearly 92,000 students, who were victims of for-profit college fraud.
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Things You Need To Know
B What Dates Do I Use For My Graduate Student Application
When applying for student loans or interest free status, you can apply for a maximum of 52 weeks of funding based on your admit term. Alternatively, you can apply using dates that are less than 52 weeks but ensure you use standardized session start and end dates.
E.g. If you were admitted in winter 2020, you can apply from Jan. 1, 2010 till Dec. 31, 2020, you can also apply using Sept. 1, 2020 to Dec. 31, 2020 but you cannot apply using Sept. 1, 2020 Aug. 31, 2021.
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Less Interest Accrues On Subsidized Loans
Students who have high financial need qualify for federal direct subsidized loans. The government pays the interest on subsidized loans when theyre in deferment while youre in school, in your grace period and if you take a break from payments.
Private loans dont have this benefit. Interest starts accumulating on private loans and on unsubsidized federal loans as soon as theyre paid to you.
Maximum Lifetime Limit For Student Aid
There are lifetime limits on the number of weeks you can receive student aid. This includes interest-free periods while you are in school. Once a lifetime limit has been reached, interest starts to accumulate. You will also have to start paying back the loan 6 months after you graduate or finish your studies.
Full-time students can receive student aid for no more than 340 weeks, except:
- students enrolled in doctoral studies can receive student aid for up to 400 weeks
- students with permanent disability can receive student aid for up to 520 weeks
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Federal Student Loan Benefits
- You have flexibility. Though any student loanfederal or privateis a legal agreement and must be paid back with interest, federal student loans generally offer more flexible options than private student loans. For example, with federal student loans, the borrower can change their repayment options even after the loan has been disbursed .
- You can make payments based on your salary. Some federal student loans allow for income-driven repayment plans, which cap payments based on the borrowers income and family size.
- You dont need a strong credit history to get federal student loans. Unlike with private student loans, most federal student loans dont require the borrower to have a strong credit history. This can be especially helpful for recent high school graduates who plan on attending college but havent had enough time to build up credit of their own.
- You dont need a cosigner. With most federal student loans, other than Direct PLUS Loans, the borrowers credit is not considered, so its not necessary to apply with a cosigner.
How Much Can You Get
The amount you can receive depends on several factors, including:
- your province or territory of residence
- your family income
- your tuition fees and living expenses
- if you have a disability
The amount you can receive in grants and loans is calculated when you apply with your province or territory.
To find out if you can receive Canada Student Grants or Loans, use the federal student aid estimator. Note that this estimator doesn’t take into account the provincial and territorial student grants and loans.
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Student Loans: Next Steps
Most likely, Congress will reach a short-term funding deal to keep the federal government operational, or there will be a short-term shut down of the federal government. The important thing to remember is that your student loan payments are still due, regardless of a government shut down. Private loans arent impacted by a government shut down. While federal loans are temporarily in forbearance, you would still owe federal student loans beginning February 1 if there is no extension. The best thing you can do for your student loans now is to know your options for student loan repayment. With temporary student loan relief ending, its more important than ever to get wise on your student loans. Here are some smart ways to pay off student loans faster:
Who Qualifies For Student Loan Relief From Navient
Nearly 66,000 borrowers with subprime private loans serviced by Navient will have their remaining loan balance discharged. Impacted borrowers will receive a notice of private debt cancellation by July 2022, and they don’t need to take action to qualify for this group’s $1.7 billion worth of relief.
Additionally, 350,000 federal loan borrowers who were placed on long-term forbearance will receive a restitution payment of about $260 each, amounting to a total payout of $95 million. These borrowers “will receive a postcard in the mail from the settlement administrator later this spring,” according to the Pennsylvania Office of the Attorney General. If you think you qualify for a restitution payment, be sure to update your mailing address on the Department of Education’s website.
If you don’t qualify for this student loan relief,you could consider your alternative student loan repayment options like refinancing. Student loan refinance rates are still near record lows, according to Credible, which gives borrowers the opportunity to lock in better terms on their student debt repayment.
You can learn more about student loan refinancing by getting in touch with a knowledgeable loan officer at Credible.
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Am I Eligible To Apply For Loans
The Government Student Loans program is available to Canadian Permanent Residents, Citizens and Protected persons .
You will apply for funding through your province of residence. When you apply through your province, you are automatically assessed for provincial as well as federal loans and grants.The general “rule of thumb” is the last province a student lived in for at least 12 months without attending a post-secondary institution is your province of residence.E.g. A student who has moved from Ontario in August 2020 to attend UCalgary starting in September 2020 is to apply for student loans from Ontario.
If you are unsure of your eligibility, please contact your province of residence to confirm with them.
If you are applying through Quebec or Ontario, you are not eligible for funding.
All other provinces usually fund Open Studies.
However, if you are applying through Alberta, you are only eligible to be assessed for 12 consecutive months of funding irrespective of your course registration status.
Course load percentage: 20%
Course load percentage: 40%
Course load percentage: 60%
Course load percentage: 80%
Course load percentage: 100%
Course load percentage: 40%
Course load percentage: 60%
Course load percentage: 80%
Course load percentage: 100%
Do You Have To Pay Financial Aid Back
Financial aid in the form of a loan is to be paid back. If it is a federal loan, repayment begins after a student has graduated, with a grace period of six months after finishing school. On the other hand, privately-issued loans may require repayment during the school year. Other forms of financial aid, such as scholarships and grants do not need to be paid back.
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How Is Aid Calculated
FAFSA aid is calculated based on a number of factors. Broadly speaking, these include a students Expected Family Contribution and cost of attendance. A students EFC is subtracted from their COA to determine the amount of need-based aid the student is eligible for. Next, to identify non-need-based aid, any financial aid already received is subtracted from the COA.
Chief Executive Tax Avoidance Issue
In January 2012, a BBC Newsnight and Exaro investigation revealed that Ed Lester, the head of the SLC, was being paid his salary via a private firm, allowing him to reduce his payment of income tax and national insurance contributions. It was subsequently announced that he would be treated as a regular employee in the future. In May 2012, Lester announced he would be leaving the SLC at the expiration of his contract in January 2013 although he insisted that the controversy had no bearing on his decision. His replacement is Mick Laverty, a former regional development agency chief executive, appointed in October 2012 and incumbent from January 2013.
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Stafford Loan Aggregate Limits
Students who borrow money for education through Stafford loans cannot exceed certain aggregate limits for subsidized and unsubsidized loans. For undergraduate dependent students, the maximum aggregate limit of subsidized and unsubsidized loans combined is $57,500, with subsidized loans limited to a maximum of $23,000 of the total loans. Students who have borrowed the maximum amount in subsidized loans may take out a loan of less than or equal to the amount they would have been eligible for in subsidized loans. Once both the subsidized and unsubsidized aggregate limits have been met for both subsidized and unsubsidized loans, the student is unable to borrow additional Stafford loans until they pay back a portion of the borrowed funds. A student who has paid back some of these amounts regains eligibility up to the aggregate limits as before.
Graduate students have a lifetime aggregate loan limit of $138,500.
Student Loan Forgiveness Is Not The Same As Forbearance
Forgiveness eliminates your debt forbearance postpones your payments. If you’re having trouble making student loan payments, you can ask your lender for forbearance. Your lender may not give you a forbearance if you don’t meet eligibility requirements, such as being unemployed or having major medical expenses.
Interest on your loan will still accrue, and you can pay that interest during the forbearance period if you want. If you don’t pay it, the accrued interest will be added to your principal balance once your forbearance period is up. Your new monthly payment will be slightly higher as a result, and you’ll pay more interest in the long run.
The only relationship between forbearance and forgiveness is that when you’re in forbearance, since you’re not making payments, you’re not making progress toward the payment requirements of a forgiveness program you might be participating in.
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Student Loans In Bankruptcy Proceedings
United States federal student loans and some private student loans can be discharged in bankruptcy by demonstrating that the loan does not meet the requirements of section 523 of the bankruptcy code or by showing that repayment of the loan would constitute “undue hardship.” In contrast to credit card debt, which often can be discharged through bankruptcy proceedings, this option is not generally available for educational loan debt. Unless able to prove the loan was not an educational benefit, those seeking to discharge their student loan debt must initiate an adversary proceeding, a separate lawsuit within the bankruptcy case where they illustrate the required undue hardship. Many borrowers cannot afford the up front costs to retain an attorney or the additional litigation costs associated with an adversary proceeding, let alone a bankruptcy case. Further complicating matters, the undue hardship standard varies from jurisdiction to jurisdiction, but is generally difficult to meet. In most circuits discharge depends on meeting three prongs in the Brunner test:
In July 2021, The U.S. Court of Appeals Second Circuit ruled that private student loans are dischargeable in bankruptcy. This case was the third known case opening the possibility of bankruptcy protection for student debtors.
How To Apply For Federal Student Loans For College
Applying for a federal student loan is free. All you need to do is complete the . In addition to federal student loans, the FAFSA also determines your eligibility for other federal student aid like grants and work-study. You need to submit the FAFSA every year youre enrolled in college to receive federal student aid.
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Want to pay less for college? File the FAFSA® to see how much financial aid you can get. Sallie Mae and our partner Frank make applying easy with a faster, simplified process and step-by-step guidanceand it’s free.
The easiest and fastest way to file the FAFSA is online. Your application will be processed within 3-5 days. You can also mail in a paper application, but processing it will take about 7-10 days.
Submitting the FAFSA is totally free. If youre asked to pay, that means youre in the wrong place.
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How Is Financial Aid Awarded
Most of the details of obtaining financial aid take place at the college or university level. Importantly, while there are lots of similarities in the ways colleges award aid, each school has its unique process when it comes to open dates, deadlines, procedures, and the actual awards process.
It’s especially important to understand the differences between scholarships, grants, and loans when you read your financial award letter. Some schools, for example, promise to cover 100% of your financial aid needs but do so by including student loans.
Others package financial aid with no loans and some even raise your financial aid package each year to cover tuition increases. It pays to know not only what you will get but also how it will be packaged. A big part of the financial aid awards process has to do with you and your family’s ability to pay for collegethat is, your expected family contribution .
Keep in mind, however, that beginning in July 2023, the term “student aid index” will replace EFC on all FAFSA forms. In addition to some changes in the way the SAI is calculated, the change attempts to clarify what this figure isan eligibility index for student aid, not a reflection of what a family can or will pay for postsecondary expenses.
What If I Change My Enrolment Status While Receiving Loans
If a change in your registration impacts your enrolment status , you may no longer be eligible for funding and any undisbursed funding will be canceled. The institution is obligated to update your lender with changes in your registration and this is done through an automated process that runs once a week after the course add/drop deadline up until after the withdraw deadline for courses.We strongly advise you to contact an Enrolment Services Advisor and your lender if you are considering dropping courses.
Use the standardized first and last day of the month for your application.
Fall term only
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