Student loan debt is practically unavoidable when you seek higher education. When all is said and done, you’re walking into life with a hefty sum to pay back to your original lenders. Student loan debt doesn’t have to be the elephant in the room behind every financial decision you make. When you choose to refinance, you’re able to get a lower interest rate or monthly payment rate, making life easier.
The Student Debt Crisis and Refinancing
According to Zack Friedman, the Senior Contributor of Personal Finance with Forbes, “There are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. Student loan debt is the second highest consumer debt category after mortgage. Borrowers in the class of 2017, on average, owe $28,650, according to the Institute for College Access and Success.”
You’re not alone in this, and we are here to help you understand refinancing your student loans. Refinancing your student loans won’t make that debt disappear but will make the burden much more manageable. Finance Twins estimates “If you have $70,000 in loans, refinancing and lowering your interest rate from 6% to 5% could save you $4,161 over a standard 10-year repayment period.”
The key questions to consider are why should I refinance my student loans, and when?
Why Should I Refinance My Student Loans?
There are many reasons people choose to refinance their student loans.
- Lower Rate: Many borrowers can reduce the rate on their loans by refinancing. It takes a few minutes to check and does not impact your credit score. Variable rate loans will often offer you the lowest rate. In the current falling rate environment, consider refinancing into a variable rate loan that you can switch to fixed rate in a few years.
- Lower Payments: Refinance for a longer term and reduce monthly payments. Often, you can get both a lower rate and choose a longer term to dramatically reduce your monthly payments.
- Consolidation: Simplify by consolidating multiple loans into a loan from a single lender. Federal student loan consolidation options exist. However, unlike student loan refinancing where the lender may offer you a lower rate, the federal consolidation merely combines your multiple loans into a single loan.
- Release co-signer: If you were the lucky among us your parents or grandparents helped you and co-signed your loans. Now that you are standing on your own two feet, you may feel the need to release them of their obligation by refinancing your loan.
The main “why” when people refinance student loans is to save money in the long run.
When Should I Refinance My Student Loans?
There is a proper time to consider refinancing:
- Good Credit: You will need to have good credit to get approved for refinancing. Moreover, the benefit of a lower rate is available to mostly people with good credit.
- Stable Income: Lenders want to know that you can pay off your loans. You must be employed in a full-time position or have a firm offer of employment starting soon. If you can’t qualify on your own consider adding a co-signer.
The right “when” to refinance your student loans is when you have found a loan that works for you. One such place to find student loan refinance suited to your needs is Lend-Grow. Lend-Grow connects borrowers with a network of local lenders that compete to offer refinance loans. Nish Krishna, Lend-Grow’s founder, says “Local lenders often offer low rates as they are not spending millions of dollars on brand advertising and flashy technology. While the application process might take a few more days with a local lender it’s well worth the patience and tens of thousands of dollars in savings on interest over the lifetime of loan.”