Are you frustrated and overwhelmed with your monthly student loan payments?
It can be difficult to manage multiple student loan accounts. The chances are you are probably paying too much in interest as well.
Student loan refinancing and consolidation can help solves these frustrations.
What is student loan refinancing and consolidation?
Refinancing allows you to change lenders along with a few other aspects of your loan such as:
- Interest rates
- Payment terms
- Payment date
- Easier management
I have spent a great deal of time researching student loan refinancing. If you read my story here you will see that I graduated with six figure student loan debt.
Here are the Top 6 Reasons You Need to Refinance Your Student Loans that I came up with during my research.
Lower interest rate.
When you applied for your student loans you most likely didn’t have great credit. You were young. Now that you are older and have been building credit you will most likely qualify for lower interest rates.
Lower interest rates will reduce both your monthly payment and your overall cost of the student loan.
When I refinanced by student loans my interest rate went from an overage of over 10% to right around 5%. That is an enormous savings. Tens of thousands of dollars in savings.
If you have $100,000 in student loans at 10% interest you will pay over $51,000 in interest over the 10 year loan repayment term.
If you refinance and get a rate of 5.5% you will pay around $27,000 in interest over 10 years. That is a savings of over $24,000. That is huge! That is a down payment on a house.
Lower your monthly payment.
Refinancing your student loans can reduce your monthly payment in a couple of ways. One being what I mention above, getting a lower interest rate.
Another way can be by changing your repayment term. If you current loans are a 10 year repayment term and you can’t afford the monthly payments you may be able to refinance and get a longer term.
If you refinance your student loans with a 15 or 20 year term then your monthly payments will drop dramatically.
Note that extending your repayment term will increase the overall cost depending on your new interest rate. Only do this option if you can’t afford monthly payments or you will still be saving money.
Drop your cosigner.
Many lenders require a cosigner when a college student applies for a student loan. This is because most college students don’t have great credit and have never made more than a few thousand dollars from their summer job.
Having a cosigner can add a lot of stress to the relationship with that person. If you can’t pay then they are on the line.
Now that you have a degree and a job you should consider dropping your cosigner. This will release them from being responsible if the borrower defaults.
If you have good credit and steady income, many lenders will allow you to apply without a cosigner.
When I graduated from college I had student loans from multiple lenders. This was for a few reasons. One, my original lender wouldn’t approve me for additional loans. Two, banks frequently sell your student loan.
This led me to have to pay multiple loans from multiple lenders each month. It was stressful just making sure I didn’t miss one.
When you refinance you can consolidate loans from multiple lenders. This lets you put all of your loans, or the ones you want, in one place instead of many.
It is so much easier to manage each month when you only have to worry about one payment.
You’re probably eligible to refinance.
I have had conversations with a lot of college graduates who say they haven’t refinanced because they figured they weren’t eligible.
They thought they didn’t have the credit or the income to qualify.
This is not the case for most people. If you have good credit and steady income then you will most likely qualify.
When I refinanced I was only making around $40,000 a year. I had good credit but I also had a large loan balance. I was approved without an issue.
I used SoFi, check them out to see if you qualify.
Flexible payment plans.
Private student loans usually have very limited repayment options. When you refinance there are usually additional options you can choose.
I know when I applied for SoFi there were a half dozen or so options I could choose.
Choose the one that fits your budget. If you have room for higher monthly payments then choose a 7 year term.
If you are low on monthly cash flow that pick a longer term.
If you are struggling with your current student loans or you just don’t want to pay more than you have to then refinancing is for you. From reducing your interest and monthly payments to having just a single payment, refinancing can make your life a whole lot better.
Have you refinanced your student loans or are considering it? Why did you choose to refinance?