In a Nutshell: As the student debt burden continues to rise in the United States, loan consolidation and refinancing can help consumers simplify payments and save money on interest. LendEDU helps borrowers evaluate their financial options by centralizing information from multiple lenders. And while refinancing and consolidation can ease financial burdens, they may also affect federal student loan benefits like forbearance, deferment, and debt forgiveness. That’s why LendEDU provides educational resources to help borrowers understand these perks and potential pitfalls so they make informed decisions.
Student loan debt is one of the most pressing financial issues facing the current generation. According to Forbes, more than 44 million Americans owe a collective $1.5 trillion for their college educations. Those figures make student loans the second largest category of consumer debt in the United States — after mortgages.
Even with a well-paying job and favorable terms, carrying student loan debt can be stressful. But many graduates don’t have lucrative job offers awaiting them when they finish school, which can compound that stress.
For those who qualify, refinancing a student loan may present a way to lower interest rates, extend the terms of the loan, and consolidate multiple debts into a single payment. In the process, borrowers may be able to simplify loan payments, save money, and ease the financial pressure of student loan debt.
LendEDU was founded in 2014 to help consumers take advantage of those benefits. CEO Nate Matherson — and other employees of the company who carried student loan debt — set out to create a centralized marketplace where consumers can examine their student loan options, especially for refinancing.
The platform provides side-by-side comparisons of lenders and terms, which allows consumers to weigh the advantages of each company’s offer and, hopefully, save the most money. The LendEDU marketplace also provides information and options for other types of loans, credit, and insurance, but none of these have eclipsed the platform’s original vision.
“We’ve expanded to become an all-in-one personal finance marketplace,” said Mike Brown, Research Analyst at LendEDU. “But student loans are still our bread and butter.”
Comparison Shopping Enables Borrowers to Select the Most Advantageous Options
LendEDU’s marketplace model presents one significant advantage to consumers: the ability to comparison shop for loans. All borrowers need to get started are some basic financial figures.
“We present the information that our partners have on a product like student loan refinancing or private student loans, and the consumer enters information on our site, including their credit score and their income,” Brown said.
Based on those inputs, LendEDU returns information about companies that may offer more favorable terms and conditions. Presenting these numbers side by side makes it easy for consumers to weigh their options.
“If you go to our private student loans page, or even our credit cards page, we feature the pros and cons of each company. That all comes from our content team and our own research, so we’re giving the reader a completely objective resource not influenced by lenders.” — Mike Brown, LendEDU Research Analyst
“It saves you a ton of time. Instead of going to every single private student loan company’s website and filling out an application and waiting for results, you can come to our site and do it all in one place,” Brown said.
Although LendEDU partners with various lenders, it maintains a focus on the consumer so it can deliver unbiased information to borrowers. To that end, the company’s content and development teams are separate, ensuring consumers can make the right borrowing decision.
“We pride ourselves on not letting student loan refinancing companies influence what we say on the page,” Brown said. “If you go to our private student loans page, or even our credit cards page, we feature the pros and cons of each company. That all comes from our content team and our own research, so we’re giving the reader a completely objective resource not influenced by lenders.”
Consolidation and Refinancing May Make Student Loan Debt More Manageable
Some college graduates may be juggling multiple federal student loans, which can become difficult to track and manage. Moreover, meeting payments can also create financial hardship, especially for recent graduates who are struggling to find a job. Consolidation and refinancing may save them time, money, and effort.
“The biggest advantage is consolidating six or seven different federal loans at different interest rates and different repayment lengths into one easy-to-track loan,” Brown said. “That makes your life less stressful, and it’s easier to make one payment per month instead of six or seven.”
However, the decision to refinance requires research and consideration to reap the greatest benefits. According to Brown, if federal student loan interest rates are high, and a consumer has a fixed interest rate federal student loan, he or she may be able to lower that interest rate by a few points through refinancing.
Most federal student loans come with 10- or 20-year repayment periods, and another benefit of refinancing may be extending the length of that window. If a borrower becomes concerned that they can’t repay the loan within the allotted time, refinancing may be able to provide some much-needed breathing room.
“You’re basically extending that federal loan and the time you have to repay it, which may also save you money,” Brown said.
Helping People Understand the Pros and Cons of Refinancing
The reasons for refinancing a student loan are different for borrowers based both on their situation and the terms of their student loan. To help guide the decision to refinance, Brown recommends waiting a couple of years after graduation before refinancing student loans.
By holding off on refinancing, college graduates give themselves a chance to build a credit history, a career, and a savings account. All of these are attractive to refinancing companies, which will extend more favorable terms to applicants with higher credit scores, stable annual incomes, and money in the bank.
“These borrowers, in the eyes of the financial institutions, look like the least-risky propositions. Fresh out of college, you might not even have a job yet. They have little to no credit history,” Brown said. “If you try to refinance straight out of college, you might not get optimal refinancing terms. But if you wait a couple of years after you graduate, build up your credit history, you may be able to maximize your repayment terms and get the best interest rate possible.”
While there are plenty of good reasons to refinance federal student loans, there are also good reasons not to refinance. As the Federal Student Aid website explains, two of these are forbearance and deferment. Forbearance allows borrowers to reduce or suspend payments due to financial hardship, while deferment additionally releases borrowers from the responsibility of paying interest accrued during the deferment period.
“Forbearance and deferment can be beneficial if you’re a young graduate struggling to find a well-paying job,” Brown said. “When you refinance, you can still keep some of those forbearance benefits with a private student loan company, but they’re never going to be as friendly as what the federal government can offer.”
Another benefit of federal student loans is debt forgiveness. This option is available to employees of the government or certain nonprofit organizations and to teachers who meet specific criteria. Student loan forgiveness is not an option offered by private loan companies. Additionally, federal loans are more flexible, calculating monthly payments based on income and, in some cases, offering the option to extend the repayment term.
“Once you refinance, private companies are pretty rigid on their repayment plans, and you’re locked into that,” Brown said. “It helps to have some flexibility in your repayment plan.”
Consumer Education Can Help Minimize the Burden of Debt
With the student debt burden rising, it’s important for current and future college students to understand their loans and their options. To help them do so, LendEDU offers additional educational resources.
“We pride ourselves on being an educational resource for consumers — especially student loan borrowers — and all of our resources are free,” Brown said.
All of the content is based on a data set of student loan debt figures for more than 1,000 schools. LendEDU uses that information to compile reports that help consumers better understand student loan debt.
Foremost among these resources is its Average Student Loan Debt Statistics by School by State. This page provides a high-level overview of the 250 schools with the highest and lowest debt rankings. The page also provides statistics on the number of graduates carrying student debt as well as rankings of private and public colleges.
And LendEDU provides a list of bullet points containing key observations drawn from that data so users can find the information they need quickly.
Brown also said that LendEDU will soon release a comparison of schools showing how student debt figures have changed over the past decade. This resource will enable college students to make smarter decisions and possibly limit the debt they incur in college. Through careful financial planning, graduates can enter the workforce and start their careers with a minimal amount of debt, rather than bearing a considerable burden after graduation.