Read this if you’re considering refinancing your student loan debt.
Estimated read time ~5 minutes.
Student loan refinancing is all I’ve been talking about lately. Why? Refinancing your student loans is the easiest way to make your student loan payments go farther and it doesn’t require any sacrifice, other than a little time to explore your rates and submit applications. So why don’t more borrowers do it? Maybe people are afraid it’s a scam, maybe they’re worried about the impact on their credit score, maybe they’re worried about losing important federal benefits. Whatever the reasons for avoiding it, today’s review of the benefits of refinancing your student loans should give you a reason to consider refinancing.
You can save a ton of money
Depending on your current interest rate and your remaining loan balance you can save major money, we’re talking thousands to tens of thousands of dollars. Interest rates are starting to creep up right now but they’re still good for borrowers with good credit. The best rates go to those with good credit scores, generally >750 but the higher the better. The minimum required credit scores are generally around 680. You can potentially leverage the excellent credit of someone else by having them co-sign your loan to get a better rate, however this can detract from your personal sense of financial freedom.
By lowering your interest rate, refinancing enables you to get out of debt faster without having to sacrifice to make a higher payment.
You can get better customer service
The customer service of many federal loan servicers is terrible. Sometimes the customer service is not only terrible but potentially unethical. Such is the case with Navient who is being sued by the Consumer Finance Protection Bureau (CFPB) with allegations of mishandling payments and failing to direct borrowers to the best repayment plans. Most refinancing companies have far better customer service and are readily accessible via email or a quick phone call.
You can choose a more aggressive repayment term and monthly payment
Many refinancing companies offer terms as short as 5 years. If your goal is to aggressively repay your student loan debt and you can afford a 5 year term you can get better interest rates. Some borrowers like the shorter term and higher required monthly payment because it holds them accountable to an aggressive repayment schedule. However other borrowers prefer a longer term so they have lower required montly payments and more cushion in their budget. This gives them flexibility to allocate extra funds to student loans when able. Whichever approach you choose some companies, such as Earnest, offer flexible terms based on the specific monthly payment you select.
You can consolidate federal and private student loans
Having multiple individual student loans can be a lot to keep track of, all the different interest rates, multiple loan balances, making payments on different websites for federal vs private loans.. agh! If that seems chaotic, inefficient, or just plain annoying refinancing can eliminate it. When you refinance, all your refinanced loans become one single private loan with one interest rate and one loan servicer. A side note here, you may not want to refinance all your individual loans if some of your loans have a lower interest rate than the rate you will get when you refinance.
You can take charge of your debt by putting it on your terms
Have you noticed how much decision making power you get when you refinance? You choose your company, you choose your term, you choose your monthly payment. All of this contributes to a sense of power and ownership of your student loans. Rather than feeling like a helpless victim you get to feel like a financially savvy freedom fighter for your debt free dream. Your student loan debt is yours to tackle and refinancing is one the tools that puts some power back in your hands.
Refinancing has a lot of benefits for the right borrowers. If you’re not sure if refinancing is right for you check out Is Refinancing Right for You? to get started. Prefer to watch? Check out Repayable on YouTube.
Additional Resources
The Top Four Refinancing Companies
How to Choose the Refinancing Benefits You Need
Get The Refinancing Master List a complete resource of refinancing companies as soon as it’s available.
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