If you went to school to get a master’s degree, you likely had to borrow a significant amount of money to pay for your education.
The National Center for Education Statistics reported that 60% of graduate school completers had student loan debt. On average, borrowers left school with $66,000 in total student loan debt from their undergraduate and graduate degrees.
Worse, the average graduate school borrower takes 23 years to repay their loans, causing them to pay back thousands more in interest charges than if they were able to repay their loans under a 10-year repayment plan.
If you’re wondering how to pay off grad school loans as quickly as possible, student loan refinancing can be an excellent strategy.
And with a master’s degree, you’re a great candidate.
4 reasons why you should refinance grad school loans
While student loan refinancing can be a useful tool for borrowers with different types of degrees, it can be especially helpful if you went to graduate school for the following reasons.
1. Graduate school loans tend to have the highest interest rates
One of the biggest reasons to refinance grad school loans is to get a lower interest rate. Loans for graduate or professional school borrowers tend to have the highest interest rates of all student loans. For example, if you took out federal Grad PLUS Loans between July 1, 2019, and June 30, 2020, your interest rate is a staggering 7.08%. By contrast, Direct Unsubsidized Loans for undergraduate borrowers during that same time period had an interest rate of just 4.53%.
With such high rates, your loan payments may not make much progress against the principal. By refinancing your student loan debt, you can secure a lower rate, and more of your monthly payment will go toward the principal rather than interest.
2. You’re a prime candidate for student loan refinancing
If you have a master’s degree, you likely earn a higher income than most people. If you have good credit, too, this makes you an ideal student loan refinancing candidate. According to the U.S. Bureau of Labor Statistics, the median salary for full-time workers with a master’s degree is $12,000 higher than the median salary for workers with only a bachelor’s degree.
With a higher income and graduate degree, you’re more likely to qualify for student loan refinancing and get the most competitive interest rates. And if you can afford the higher monthly payments that come with a shorter loan term, you may be able to secure the lowest possible rates that refinancing companies offer.
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3. The student loan savings can be significant
If you refinance grad school loans, you can save a substantial amount of money over the life of your repayment term. How much can you save? Let’s look at an example.
Harry graduated with a master’s degree and $66,000 in Grad PLUS Loans. His loans had an interest rate of 7.08% and a 10-year repayment term. By making just the minimum payments, he paid $26,285 in interest charges by the time he paid his loans off.
But Harry decided to refinance his student loans right out of graduate school. He qualified for a 10-year loan at 5% interest. Because he refinanced, he paid just $18,004 in interest charges. By refinancing his loans, he saved $8,281.
The refinancing process is quick — it usually takes less than 15 minutes to apply — and there’s no fees involved. By taking just a few minutes to refinance your loans, you can save thousands over the course of your repayment term.
|Original Loan at 7.08%||Refinanced Loan at 5%|
|Loan Term||10 Years||10 Years|
|Total Interest Paid||$26,285||$18,004|
|Total Amount Paid||$92,285||$84,004|
Saving for College reported that the typical bachelor’s degree graduate has between eight and 12 different student loans. With a master’s degree, you likely had to borrow even more money for school, so you could have several more loans to manage.
Having so many different loans is a recipe for disaster. It can be confusing to keep track of so many different minimum payments, loan servicers, and due dates.
By refinancing your loans, you can consolidate them together and have just one loan and one simple monthly payment to remember. By streamlining your loans you’re less likely to forget to make your minimum payment. Plus, most refinancing lenders offer an interest rate discount if you sign up for automatic payments, allowing you to save even more money.
4. You can reduce your monthly student loan payments
When you refinance your student loans, you can qualify for a lower interest rate. Or, you can opt for a longer repayment term to reduce your monthly payment and get more breathing room in your budget. Especially if you have a high student loan balance, refinancing your loans can give you the flexibility you need as you build your career and finances.
How to pay off large student loan debt amounts
If you’re trying to figure out how to pay off grad school loans, student loan refinancing can be an effective strategy to accelerate your debt repayment and save money.
By being proactive and deciding to refinance grad school loans, you can lower your interest rate, streamline your payments, and even reduce your monthly payments.
If you decide that student loan refinancing is right for you, use Purefy’s Compare Rates tool to shop around and compare refinancing quotes from top lenders – quickly and easily. You can pick the best lender for you and apply online in as little as 15 minutes. Purefy’s partner lenders also don’t charge application or origination fees, and there are no prepayment penalties if you decide to pay off your loan early.