In 1982, the Massachusetts state legislature created the Massachusetts Educational Financing Authority (MEFA) at the request of colleges throughout the state. Leaders in higher education and government believed that the residents of Massachusetts needed an agency dedicated to providing low-cost financing for college students and their families. To fulfill that mission, MEFA offers financial counseling for college students and their families, low-cost student loans, and college savings plans.
Today, MEFA’s reach extends beyond its original mission. MEFA provides college planning assistance and information for parents with children as young as 3. Representatives visit high schools throughout the state to talk to students and families about college admissions and financial aid.
MEFA also started offering financial products to help make college more affordable for students and families. They have a college savings plan that families can start before their child even starts preschool. They offer low-cost student loans for residents of Massachusetts as well as refinancing student loans for all eligible students and families in the country.
How to Refinance Your Student Loans Through MEFA
Although MEFA was created to serve the citizens of Massachusetts, you don’t have to be a Massachusetts resident to refinance your loans. Any U.S. citizen or permanent resident with at least $10,000 in student loans from a qualifying institution of higher education may be eligible to refinance a student loan through MEFA.
Borrowers can refinance both federal and private student loans. The loan must be in repayment on good terms and cannot be in a grace period, forbearance, or deferment in order to qualify for student loan refinancing with MEFA. There are no application fees, origination fees, or prepayment penalties on MEFA student loans.
You can apply online to refinance your student loan through MEFA. Once you fill out the online application, you’ll receive a preapproval decision immediately. Before receiving a final loan approval decision, you’ll need to submit documentation that verifies employment and income as well as the current loan details and payoff amounts.
Once all of that has been processed, you can choose either a fixed interest rate or a variable interest rate. Then, the loan process is complete and the payment can be disbursed.
What Are the Benefits of Refinancing Through MEFA?
One of the major benefits of refinancing through MEFA is the potential to reduce monthly student loan payments by receiving a lower interest rate. MEFA’s interest rates are competitive with other larger lenders and low compared to some smaller financial institutions. Borrowers can also take advantage of some the counseling services that MEFA provides.
What Are the Costs and Negatives of MEFA?
Fixed rates on refinanced student loans vary from 4.95% to 6.95%. Variable rate loans start at 4.68%. The interest rates are competitive, but one of the places that MEFA may fall short compared to other lenders is in the relative lack of flexibility.
MEFA only offers loans with a 15-year term. It also doesn’t offer benefits like deferment and forbearance to borrowers who lose their jobs or face other types of financial hardship.
Some borrowers may have trouble qualifying to refinance their student loans because their income is too low, their debt-to-income ratio is too high, or they don’t have enough credit history yet. In those cases, the borrower can ask someone to serve as a cosigner for the loan.
Unfortunately, MEFA does not offer cosigner release options on refinance loans if the borrower makes all the payments on time for a specified period. That means the cosigner will be on the hook for the whole 15 years – unless you can successfully refinance with another lender to remove the cosigner.
Although MEFA refinances both federal and private student loans, the new loan with them is considered a private student loan. When a borrower refinances a federal student loan into a private student loan, all benefits associated with the federal loan are gone.
For example, federal student loans, once they’re refinanced, are no longer eligible for public service loan forgiveness, teacher loan forgiveness, or any other similar loan forgiveness program. Borrowers also lose the ability to request an income-driven repayment schedule on their MEFA student loans.
MEFA’s mission of helping to make a college education affordable carries through after college graduation with its student loan refinancing program. As a result, the interest rates are fairly low.
Borrowers, however, can miss out on a lot of repayment options and benefits that they might get by refinancing with a larger financial institution. Borrowers with good credit and stable employment, however, can benefit from the low interest rates if they are not bothered by the lack of loan choice.3.16 MEFA
Author: Jeff Gitlen
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