Student Loan Debt Refinance
Refinancing your student loans can make a lot of sense if you want to take advantage of lower interest rates, but it’s not for everyone. If you have good credit, consider whether refinancing could help you get better loan terms.
Refinancing your student loans can make a lot of sense if you want to take advantage of lower interest rates, but it’s not for everyone.
If you’ve done your homework, refinancing your student loans can make a lot of sense if you want to take advantage of lower interest rates. It’s not for everyone, though. You need to do the math and be sure that the costs are worth it for your situation.
If you’re able to make the monthly payments on a new loan after refinancing, then great! You’ll have more money in your pocket each month because of lower interest rates. But be careful: refinancing isn’t always cheaper than staying with the original lender or consolidating loans at one institution (especially if there are other fees involved).
If not, then it may be better for you to stay put until things get better financially before trying again in the future.
Find out what your interest rates and monthly payments are on all of your student loans.
- Find out what your interest rates and monthly payments are on all of your student loans.
- Use this information to determine if refinancing makes sense for you.
You can find this information on your student loan statement or on the National Student Loan Data System (NSLDS). If you have more than one type of federal student loan, it’s best to calculate the annual percentage rate (APR) for each type separately. This will give you an idea of which loans might benefit most from refinancing into a new private one at a lower rate.
Check your credit score
A good credit score can be the difference between getting a great rate and paying more than you need to. Before you start the process of refinancing your student loans, check your credit score to find out what kind of interest rate you’ll qualify for. If it’s high enough and if your student loan servicer has a relationship with LendKey or Earnest, then there’s no reason not to try and refinance through them.
If this isn’t an option for you, then check out our post on How To Get Approved For A Student Loan Refinance for more information about other options for refinancing student loans with bad credit
Consider how long you have until you will pay off your loans.
Once you know how much you currently pay for your loans and which interest rate you’re paying, it’s time to start thinking about how long you have until your loan is paid off. If a lender is only offering a minimal decrease in interest rates, they might not be worth the hassle.
On one hand, if you have enough time to refinance with another company and save money on interest payments before your current loan expires, then refinancing could definitely be worthwhile. On the other hand, if there are only a few years left on your loan term and refinancing won’t gain you any additional benefits of lower monthly payments or better terms (like no prepayment penalty), then refinancing simply isn’t worth it for now.
Use the loan calculator tool to determine if you can save financially by refinancing.
Refinancing your student loans is a good idea if you can get a lower interest rate, as this will help you save money on interest over time. But it’s important to make sure that refinancing makes sense for you. If your current interest rate is higher than the new rate, then refinancing would be a good decision. However, if your current interest rate is lower than the new rate, then refinancing might not make sense because there may be little or no savings after all costs are considered. For example:
- If you have an existing balance of $50k at 4% fixed and want to refinance into fixed at 7%, it would take about 34 years before saving $1 more per month (assuming 20% down payment).
- If you have an existing balance of $50k at 4% fixed and want to refinance into variable at 7%, it would take only 23 years before saving $1 more per month (assuming 20% down payment).
If you have good credit, consider whether refinancing could help you get better loan terms.
If you have good credit and a stable job, refinancing your student loans might make sense for you. Refinancing could lower your interest rate, monthly payment and origination fee—and it could give you access to more favorable repayment terms.
If you currently have federal loans through the William D. Ford Federal Direct Loan Program, there’s no need to refinance with a private lender because those loans are eligible for income-based repayment (IBR) plans with borrower benefits that aren’t available from private lenders. However, if your federal loans were taken out under the Federal Family Education Loan Program (FFELP), refinancing may be worth considering because of its advantages over IBR plans like Pay As You Earn (PAYE).
In addition to lower monthly payments and interest rates, refinancing can also help borrowers consolidate their existing debt into one loan with an extended term that makes paying off debt easier in the long run; this may mean fewer monthly payments each month but more overall in interest fees over time.
If you have good credit, consider whether refinancing could help you get better loan terms. You can also use the loan calculator tool to see if refinancing makes sense for your situation.