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What we like:
No late fees
|Fixed APR||As low as 4.20%|
|Variable APR||As low as 4.39%|
|Loan Terms||10 or 15 years|
|Loan Amounts||$10,000 minimum|
The Massachusetts Educational Financing Authority (MEFA) was launched at the request of colleges to provide low-cost financing and aid to families in the state.
MEFA offers financial counseling for current or future college students and their families, low-cost student loans, and college savings plans, which families can start before their child even starts preschool.
This MEFA review will focus on the low-cost student loans and student loan refinancing that MEFA offers.
In this review:
- Who’s eligible to refinance?
- How to Refinance Your Student Loans Through MEFA
- MEFA interest rates & fees
- What are the benefits of refinancing through MEFA?
- What are the downsides of refinancing through MEFA?
Who’s eligible to refinance with 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.
Borrowers can refinance both federal loans and private student loans, but the loan must be in repayment and on good terms; it cannot be in a grace period, forbearance, or deferment in order to qualify.
Keep in mind that refinancing federal student loans forfeits certain borrower protections that come with federal loans, such as the potential for student loan forgiveness.
How to refinance your student loans through MEFA
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.
MEFA interest rates & fees
Fixed rates on refinanced student loans are as low as 4.95%. Variable-rate loans start at 4.68%.
There are no application fees, origination fees, or prepayment penalties on MEFA student loans.
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.
Also, the lack of fees can make it cheaper to take out your loan or pay it off early.
Finally, borrowers may be able to take advantage of some of the counseling services that MEFA provides, which can help you navigate the repayment process if you’re feeling overwhelmed.
What are the downsides of refinancing through MEFA?
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.
No cosigner release
Unfortunately, MEFA does not offer cosigner release options on refinance loans, even 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.
You may lose federal protections
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 student 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 with good credit and stable employment can benefit from the low interest rates if they are not bothered by the lack of loan choices MEFA offers.
However, borrowers can miss out on a lot of repayment options and benefits that they might get by refinancing with a larger financial institution.
Author: Jeff Gitlen