Taking Care of Business: How to Refinance MBA Student Loans

How-to-Refinance-MBA-Student-Loans

Got an MBA?

Then you likely took on a significant amount of student loan debt.

A single year at a top institution like the Wharton School at the University of Pennsylvania will cost over $114,000. If you had to take out loans with high interest rates, you could end up paying thousands in interest charges.

But thanks to your MBA degree, you also likely have a solid income. According to the National Association of Colleges and Employers, the starting average salary for class of 2019 MBA graduates was $84,580. And with such a high income, you’re a prime candidate for student loan refinancing.

If you want to refinance MBA loans to start saving substantial money with a lower rate, here’s what you need to know first.

How to refinance MBA loans

With student loan refinancing, you take out a loan from a bank or online lender for the amount of your current debt. By refinancing, you can consolidate all of your existing federal and private student loans together, so you’ll have just one monthly payment and one loan servicer going forward. With your new loan, you’ll also have a new interest rate, loan term, and minimum monthly payment.

To refinance your debt, follow these steps:

1. Decide if refinancing is right for you

Refinancing your student loans does have some drawbacks, especially if you have federal student loans. However, the advantages can be significant. There are three main benefits to refinancing MBA student loans:

You can save money

MBA loans tend to have higher interest rates than other student loans. For example, federal Direct Plus Loans have the highest interest rate of any form of federal loan at 7.08%. When you refinance your debt, you can qualify for a much lower interest rate and save significantly over the length of your repayment.

Let’s say you took out $114,000 in student loans. With a 10-year repayment term and a 7.08% interest rate, you’d pay $45,401 in interest charges alone.

If you refinanced your debt and qualified for a 10-year loan at just 4.5% interest, you’d only pay $27,777 in interest charges.

Refinancing your MBA loans would allow you to save $17,624. And you could get an even lower interest rate than this example, depending on your credit history and income.

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You can pay off your MBA student loans early

When you refinance your loans and qualify for a lower interest rate, more of your monthly payment goes toward the principal instead of accrued interest.

If you make the same minimum payment as you had before, but with a lower interest rate, you can pay off your loans months or even years ahead of schedule.

You can get a more affordable monthly payment

If you can’t afford your monthly payments or if you simply want more breathing room in your budget, refinancing can help.

You can apply for a loan with a longer loan term, reducing your monthly payment. You’ll likely pay more in interest charges, but that downside may be worth it to get a lower payment.

For example, with $114,000 in student loans at 7.08% interest and a 10-year repayment term, your monthly payment would be $1,328 per month. If you refinanced and opted for a loan with a 15-year term and qualified for a 5% interest rate, your monthly payment would drop to $902.

Refinancing your loans would free up $427 per month.

2. Review refinancing eligibility requirements

Refinancing eligibility requirements can vary from lender to lender. In general, you’ll need to have good to excellent credit, steady income, and be a U.S. citizen or permanent resident.

Most lenders have a minimum loan requirement of $5,000 to $10,000. The maximum amount you can refinance is usually around $300,000, but some lenders will allow you to refinance up to $500,000. Borrowers need good credit and steady income to qualify for a loan without a cosigner.

3. Consider adding a cosigner to your application

If your credit score is less-than-perfect or if your income isn’t very high, you can improve your chances of qualifying for a loan and securing a low interest rate by adding a cosigner to your application.

A cosigner is a spouse, parent, friend, or other relative who applies for a loan with you. If you miss payments, the loan servicer will go to the cosigner for them in your place.

Adding a cosigner to your application decreases the lender’s risk, so they’re more likely to approve you for a loan.

4. Compare offers from lenders

Loan interest rates, terms, and repayment options can vary widely, so it’s smart to get offers from multiple refinancing lenders so you can compare your options.

With Purefy’s Compare Rates tool, you can get quotes from top MBA student loan refinance lenders without affecting your credit score.

5. Submit your loan application

Once you find a loan that works for you, you can proceed with the application. You’ll be asked to enter your personal information, including name, address, Social Security number, and loan details. Once you submit the application, the lender will review your information and decide whether to issue you a loan.

Usually, you’ll receive a decision in a matter of minutes. If approved and you decide to move forward with the loan, the lender will work with your current loan servicers to pay off your existing education debt. The process generally takes a few weeks, so continue making payments on your loans to avoid late fees and other penalties.

Getting your MBA student loan refinance

If you took out loans to pay for your MBA program and have high-interest debt, opting to refinance MBA loans is a wise idea. You can save money, get out of debt faster, or lower your monthly payment.

Do you want to pay off your debt as quickly as possible? Here are 10 strategies to eliminate your debt faster.