Let’s face it — you’re busy and who has time to do the research and legwork to find out how to save money on student loans? It sounds like a good idea, but is it actually worth the hassle? If you are a college grad who has a professional career and not a lot of free time, you may be wondering if refinancing your student loan debt is worth the time. You want to do the research and pick the right lender, but can you save enough money to make it pay off in the long run? Let’s take a look! What is student loan refinancing? Similar to refinancing your home, student loan refinancing entails gathering up all of your student loans, both federal and private, and bundling them into a new consolidated single loan. When you refinance, you are working with a private lender to bring all of your loans together in a new loan with a new interest rate and loan terms that you can negotiate to fit your lifestyle. Using a private lender means that you have to qualify for your new loan with a great credit report and solid income to get the cheapest interest rate. Depending on the difference between your current average interest rate and the new interest rate that you qualify for — this is where you stand to save a ton of money over the life of your loan. The good news is private lenders that specialize in student loan refinancing don’t charge an origination fee or application fee, so it’s a great way to impact your monthly budget without incurring any unnecessary charges. How do you refinance student loans? When you decide that refinancing is the right solution for you and your financial future, then it’s time to gather up your loan information to get a clean, unblemished picture of where you are so that you can negotiate the best deal. You want to understand your average interest rate from all of your student loans, as well as your total interest paid and average terms. Next, it’s important to assess your creditworthiness. Private lenders take a more critical look at you and your finances than the federal government do when they award financial aid. They want to know that their money is being used by a person that they can trust to repay it on time with no problems. They are going to look at four things: Income and Job Stability — Whether you are self-employed or have a great job, private lenders want to know that you are generating solid income that can be counted on in the future. Credit Score — Your financial calling card. From the time you get your first credit card, the three credit agencies are monitoring your every payment and activity. And while your credit score is made up of several attributes and behaviors, e.g., timely payments, proper use of credit, etc., a good gauge is targeting above 700. The higher your score, the better your interest rate. Debt-to-Income Ratio (DTI) — Private lenders want to know that you are not overextended in your monthly obligations. Your DTI compares your monthly gross income to the debt payments you pay each month. 40% or below should be your target. Your degree and college or university – as a professional, this buys you additional credibility. As an example, a law degree or medical degree demonstrates considerable buying power and ability to repay. Next comes the research where you contact viable private lenders and collect information about the rates they are currently charging as well as the terms, offers, and specials that they advertise. Sounds like a hassle, doesn’t it? Well, there’s a better way, Purefy’s Compare Rate tool is a one-stop, easy, and free way to do all of that research (with no impact on your credit score) in about 15 seconds - flat. How does student loan refinancing save you money? Depending on when you took out your student loans and whether they were federal or private, there is a good chance that you may have paid interest rates that are much higher than they are today. It’s not unheard of to have loans with interest of 6% to 7% or even more. In fact, some Parent PLUS Loans are even higher. The good news is that today’s interest rates are at historic lows and with the outstanding economic recovery underway, that fact is no longer set in stone. Just how long interest rates will remain this low is anybody’s guess. You can choose which loans to include, so if you'd prefer to only refinance your high-interest private loans, you can keep your federal loans as-is. That’s a good reason to take advantage of the refinancing rates for student loans before interest rates start to rise. How much can you save by refinancing student loans? So let’s get down to brass tacks — can refinancing your student loans really save you enough money to make the hassle pay off? When we calculate refinance savings, we have to start with how much you are currently paying. Two components impact that number and make a difference in how you structure your new refinanced loan. Let’s look at each side of the equation: Interest rates — fixed or variable, the interest rate is what the lender is charging you to borrow money. This amount is based on the current Prime Rate that banks charge their biggest commercial lenders which, in turn, is based on the overnight rate – the rate the Federal Reserve is currently charging banks for overnight loans. The Federal Reserve (The Fed) meets nine times per year to review the interest rate which then will impact the rates being charged for new loans and changes to variable rates on existing loans. Terms — This is the length of time that you negotiate with your lender to pay your student loan debt. So, how does that look when you calculate refinance savings? Total Debt Owed Interest Rate Loan Terms Monthly Payment Total Interest Original Loan $50,000 6.8% 10 yrs $575 $19,048 Refinanced Loan - Fixed $50,000 2.6% 10 yrs $474 $6,835 In the above example, assuming excellent credit to secure the best interest rates, the savings are over $12K for the life of the loan. It also saves over $100 per month in monthly payments or $1,200 per year. How can I calculate refinance savings on my student loan? First, gather up your loan statements for all of your federal and private student loans. Each one should tell you the interest rate, term, and outstanding balance. When examining your own financial situation, you will need to summarize and average the interest rate on all of your existing loans. With different interest rates and loan terms, you will need to find a common set of criteria to compare. Since the goal is to simplify the process, there is a way to calculate refinance savings by using a student loan refinance calculator to calculate your present loans, as well as your potential new loan. With just a little effort, you can have a straightforward comparison for use when looking at actual quotes. What are the other benefits of student loan refinancing? When you look at how to save money on student loans, most people are interested in their savings in dollars and cents. But there are a ton of other benefits that you can take advantage of when refinancing. Shorten Your Loan Term — When you renegotiate your interest, you will also have the opportunity to choose your repayment terms. You can opt for a shorter loan term that will allow you to pay off your student loan debt more quickly. And now with low interest available, you might still have a monthly payment at or near your current amount. Lengthen Your Term — You can also lengthen your student loan repayment terms - sometimes up to 25 years under certain circumstances. By spreading out your payments over more time, you can greatly reduce your total monthly payment amount. Watch out, though, you may end up paying more for interest in the long run (even with the lower rates). Consolidating Payments — If you currently have a lot of loans, then you are having to manage different due dates through multiple companies, both federal and private. It can be a pain. Once you refinance, all of your payments will be consolidated into one loan with one simple payment. Some lenders even give discounts when you sign up for their auto-pay feature. Improving Your DTI — A great extra benefit of refinancing your student debt with lower interest is the positive impact it can have on your DTI. If you now have a lower payment, that improves your outlook if you want to apply for a home mortgage or auto loan. It frees up your buying power for things that are in line with financial goals. Adding or Removing a Cosigner — If you have the desire to refinance but don’t quite have the personal financial profile, you can use a parent, a grandparent, a friend, or a spouse to cosign on the loan. Some companies allow you to release the cosigner after a certain number of payments have been made on time. If you currently have a cosigner on your student loans and are at a place where you are ready to assume responsibility for your debt, refinancing can be a great way to reestablish the loan without the cosigner. Who should and shouldn’t refinance college debt? When you consider refinancing your student loan debt, you have to weigh the positives against the negatives and decide if it’s a good decision for you. It isn’t always the right answer for everyone and not everyone can qualify. You may be a good candidate for refinancing your student loans if: Good credit and job security — You have a good job that has solid long-term prospects and great credit. The average person that refinances student debt has a score over 770 points and income above $90K. Increase cash flow — You want to increase your overall cash flow. Whether you want to buy a house or take that dream vacation, a lower interest rate may just save you the money you need to take that next step in your financial blueprint. Pay off debt early — On average, it takes 21 years to pay off student loan debt. By paying off your loans early, you are freeing up your hard-earned capital for reinvestment in your future. Start a business. Get married. There are a lot of reasons to pay your debt off early. Combine student loan debt with your spouse — You can even refinance your combined debt into a single loan qualifying and the proposed interest rate is based on the spouse with the best credit score. You may want to forego refinancing if these situations apply: Questionable credit — You can always refinance once you have had time to work on improving your credit situation. That can mean pulling your free annual credit reports from each of the three agencies and making improvements where necessary. Federal loan benefits are important — If you are currently using (or want to use in the future) any of the federal loan benefits, refinancing may not be a good option for you. Those would include: loan forgiveness programs income-driven repayment plans deferment and forbearance Federal loan consolidation — One option may be to apply for a federal loan consolidation for your federal loans. While this won’t lower your interest rate, it does package your federal loans into one simple payment. This allows you some relief while you are repositioning your finances before pursuing the refinance option again. When should you refinance college loans? It seems people are always looking for the best time to refinance their student loans. The truth is, any time that works for your personal situation is a good time. The lower the interest rates, the more money you stand to save. Now is a great time because interest rates are at all-time lows and the savings potential can be enormous based on your current loans. And remember, there is no limit to how many times you refinance. If you refinanced a few years ago but are in a position to gain an even better interest rate because of improved credit or a lower Prime Rate, go for it. Different than a mortgage refinance, student loan refinancing doesn’t have associated origination fees, application fees, or closing costs. There’s no need to allow for that when looking at a student loan refinance. How to get the lowest student loan refinance rates It starts with finding the best rates! Refinancing student loans is very popular right now with lots of people jumping at the chance to save money. There has been an increase in private lenders advertising all over the internet. Without a doubt, today there are tons of lenders specializing in student loan refinances that are eager to compete for your business. So how do you weed through the noise and find the best options to choose from? You can look at the generally advertised rates that are available, but to really understand where you would fall, you need to get personalized estimates from the various lenders based on your actual circumstances. To do that, you have one of two choices — you can do all the research yourself, visit each website, fill out your pre-qualifying information each time, and receive an individual quote that you then can add to your growing pile of information. Or you can use Purefy’s Compare Rates tool and have all of the information at your fingertips in about two minutes. It’s fast, it’s easy, and it doesn’t cost a thing. How to compare student loan refinance rates As a busy professional, you don’t have time for wasted effort or inconclusive results! Once you decide that refinancing is an effective way to restructure your student loan debt, you want a fast, easy, and uncomplicated way to get to the answer you’re looking for so that you can move forward. Luckily, Purefy has developed a comparison tool using advanced technology that takes your financial information and presents it to a group of industry-leading private lenders for real-time quotes. Having already helped over 200K people compare rates and secure close to $1.8 billion in financing, our rate comparison tool is second to none at finding the best options based on your specific details. Here’s how it works: Fill out the basic information. This will include your demographic information and some quick personal details. It only takes a minute. Almost instantly, the Compare Rates tool provides you with quotes from three to four lenders offering the best rates (fixed or variable). Once you make your selection (after reviewing the quotes and what features and offers each company has to offer), you’ll be directed to an application wizard where you will submit your final application to the lender. The entire process can be completed in about 15 minutes and there are never any application or origination fees. In addition, there are no prepayment penalties with any of Purefy’s lenders. Is refinancing student loans worth it? It sure can be! Depending on the difference in the interest rate you qualify for, student loan refinancing can save you large sums of money over the life of your loan. Successfully refinancing your federal and/or private student loans can be straightforward with final approval and fund dispensation complete in record time. Start with your basic information and see if refinancing would help you achieve some of your personal financial goals. Ask yourself these questions: Do I have adequate income from my job or business to meet private lenders’ criteria? Does my credit report reflect my financial picture in a positive light? Or do I need to do some work to get it in shape? Would I most benefit from paying off my student loan debt sooner or would reduced monthly payments work best for my future goals? There is help available! When it comes to how to lower student loan interest, it’s often helpful to talk to an expert. That’s why Purefy offers free consultations with our student loan advisors. Experts in the field, Purefy’s advisors are available when you schedule a call to discuss how refinancing works, ask questions, learn how to compare rates, and get a sense of whether this process is right for you. Our student loan advisors are top-tier and are a big part of why Purefy earned NerdWallet’s 2021 Best-of Award for Best Student Loan Refinancing Overall. Let them help answer your questions. In Summary Sometimes achieving life-long goals requires restructuring to make things happen. When you initially took out your student loans, there’s a good chance they fit your lifestyle at that particular moment. But things change. You may now be focused on completely different goals like home and family. Student loan refinancing is, fortunately, one aspect of your overall financial outlook that can be easily restructured to save you money through lower interest rates, as well as customized terms that can allow for a speedy payoff or lower monthly payments. Today, you’re a busy professional and you know what you want. And, equally important, you want it in a straightforward, easy-to-navigate process that intuitively adapts to your next move. That means finding the answers and support you want in one location. Designed for just such convenience, Purefy’s Compare Rates tool shows you just how to lower student loan interest. Now you have access to actual prequalified rates that provide you with the quotes you need to make the best decision, as well as a team of student loan specialists that can provide the guidance you want. Check out the best student loan refinance options today!