Borrower Applications for Our Next Batch are Due August 8th

We’re excited to announce the deadline to apply to borrow in the next WeFinance batch is August 8th!  We’ve already talked to many great applicants, with developing careers in law, business, tech, health, public policy, education, and other fields, who are ready to stop overpaying interest on their student loans and similar debts by borrowing from real people at a 4% fixed interest rate, and there’s still time to join them.  If you’ve used our interest calculator or five-year plan calculator, you know that even refinancing a small share of your existing debt could save you thousands of dollars.

WeFinance borrowers make listings which share a little bit of information about themselves and offer terms for their desired borrowing, then choose how those listings are shared.  Many borrowers take advantage of our growing lender network of leaders in these same fields–real people who are sick of getting garbage interest rates on their savings at the bank and who are excited about empowering their future colleagues.  Other borrowers also extend the option to loan to their own friends, family, and colleagues, who enjoy the dual benefit of supporting someone they know and getting a better return on their savings.  Most borrowers do both, maximizing the amount they’re able to refinance at a lower rate.  By refinancing smaller amounts from a variety of individuals, borrowers enjoy an expanded support network, while lenders enjoy less risk.  Best of all, everything’s totally automated for both sides: once your bank account is linked, there’s nothing you have to do to get paid or repaid on your loans, whether you’re involved in one loan or one hundred.

Applying just takes a few minutes and is without commitment: we’ll follow up to let you know if you’re a good fit and answer any questions before you decide.

We’ve seen great success with our existing borrowers so far, and if you’ve got an expensive outstanding loan, we hope you’ll consider joining in on the next batch.  Be sure to check out our home page and FAQ for more information, and shoot us a note at support@wefinance.co with any questions you have.

Saving with a Shorter Loan Term: It’s Not All or Nothing

At WeFinance, we spend a lot of time thinking and talking about the huge disparity between the interest rates that those with student debt are often forced to pay on their traditional student loans and the interest rates people can routinely earn on their savings.  We think that many borrowers stand to benefit from an option that reduces their rate.  But, at the same time, we realize it’s not always simply a matter of interest rate.  There are several other factors to consider when comparing loan options, and one factor that many borrowers cite as key to their decision making is the length of time they have to repay the loan.

Depending on the repayment plan they’re under, a borrower might have between 10 and 25 years to repay their loan.  That loan will cost a fortune in interest over that length of time, but a borrower may not feel they can commit to paying everything back in a shorter time period, especially if they already feel like their monthly payments are close to the limit of what they can currently afford. So they worry that options like WeFinance–where their refinancing comes from real people in their network, who may not be able to wait as long as 10 or more years to be repaid–may not make sense for them.

The incredible thing about compound interest, though, is that even refinancing a small part of your loan at a lower rate can save you a ton of money.  And, one good thing about most traditional student loans is that there’s no penalty for repaying a larger share of the loan early.  So, even if you can only afford a few extra dollars a month now, you can save thousands in the long run with a partial refinance.  And, even if your current situation doesn’t allow any increase in monthly payments, you might be able to save money anyway and even lower your current monthly payments with a partial refinance loan with payments deferred.  (WeFinance loans, for example, can either have monthly payments or a lump-sum payment at the end, at the discretion of the borrower.)

To help illustrate this, we released a new ‘Five-Year Plan’ calculator this week.  In about 30 seconds, you can see how various partial refinance options with lower rates over five years can save you a bunch of money relative to just simply paying off your current loan over 10 years.

For example, if you owe $50,000 at 6.8%, even just refinancing $5,000 of that loan, at a cost of less than $35 a month for the next 5 years, would save you nearly $60 a month for the 5 years after that, and $1,380 overall.

 

And, with a 5-year loan with deferred payments, you could actually lower your monthly payment by nearly $60, and still save about $800 overall, by refinancing just $5,000.  (And, of course, the amount saved goes up the more you refinance.)

 

Of course, everyone’s exact financial situation is different, and thinking carefully about what payments you’ll be able to afford when is extremely important.  But even if you don’t know exactly what your financial future holds, there still might be a lot of money you can save.  Try our calculator, check against your own loan information (remember, things may be slightly different depending on the rules of your specific loans), and see what makes sense for you.

 

Understanding Changing Student Loan Laws

There’s been a lot of activity in recent months in terms of legal changes to student loan repayment in the US.  Unfortunately, these changes are complicated in their own right, are often bundled as part of larger legislation, and often attract a lot of press even if they never get passed.  We thought it’d be useful to summarize the major legislation together here so people can understand what changes might be coming down the pike.

• The Bank on Students Emergency Loan Refinancing Act: This piece of legislation sponsored by Senator Elizabeth Warren gained a lot of press in May and June.  The primary change it would have enacted was to allow students with existing federal student loans refinance those loans at the current rate for new undergraduate students (3.86%).  Unfortunately, the bill failed its cloture vote (the vote needed to overcome a filibuster, requiring the support of 60% of the senate) as most Republicans voted against it due to the tax increases required to pay for the bill.  It’s unlikely there will be more progress on the bill barring a substantial shift in the party makeup of congress. (Source: Elizabeth Warren’s Senate Homepage)
• The Presidential Memorandum on Federal Student Loan Repayments: In early June, President Obama signed a directive to the Secretary of Education to expand eligibility for the Pay As You Earn repayment program, which allows students with Federal Direct Loans to not pay more than 10% of their income to their student loan debt, and for any remaining balance to be forgiven after 20 years.  Eligibility is planned to be extended to older borrowers who were previously ineligible–those who started borrowing before 2007 or stopped borrowing before 2011.  But, there aren’t any changes for those with higher incomes, or who were already eligible for this program (apart from some vaguer educational measures that don’t affect how any of the loans fundamentally work).  (Source: whitehouse.gov)
• Changes to Public Service Loan Forgiveness and other programs with the 2015 Congressional Budget:  President Obama’s 2015 budget proposal includes many potential changes for student borrowers, but it’s unfortunately unclear exactly how to interpret all the changes, and unclear what (if any) of the proposals mentioned here actually will become law.  Major relevant changes in the proposal include:
  • Capping total Public Service Loan Forgiveness at $57,500 , though it is unclear if this would apply to current borrowers, and current borrowers may still have alternate resources even if so
  • Extending Repayment to 25 Years before forgiveness occurs for borrowers with over $57,500 in debt
  • Combining income of married couples when determining income levels for Pay As You Earn programs
  • Converting loan forgiveness into a non-taxable event

  Again, it’s hard to read too much into any specific proposals here because they aren’t law and weren’t even proposed by congress, but it’s worth keeping an eye on changes to these programs when the actual 2015 budget is ultimately passed.  (Source: educatedrisk.org)

We’ll continue to report on new proposals and laws as more information on them becomes available.  Of course, if you have private loans, these changes won’t automatically apply to you.  And, of course, we encourage you to check out WeFinance to save money on your debt now, regardless of what the government eventually decides to do!