Student debt is a fact of life for many, but it doesn’t have to be overwhelming. If you find yourself feeling weighed down by your private student loan obligations, it may be time to consider refinancing as a way to proactively take charge of your future.
If you have established good credit and have a stable income, student loan refinancing may be the no-brainer solution to achieve your financial goals.
What is student loan refinancing?
While in college, you may have used both federal and private lenders to fund your education — taking out various student loans with different interest rates and servicers. Now you have a patchwork of bills that are piling up and may be preventing you from realizing your plans for the future.
By refinancing your student loans, you are taking your existing student debt and rolling it into one new comprehensive loan with more favorable conditions. This allows you to define your terms and create a plan that fits with your financial needs and student loan pay off goals. That could mean saving money with a lower interest rate, choosing a more manageable repayment term, and combining all your student debt into one easy payment.
The most recent information available on student loans shows that the average debt carried by people recently graduating is $29,800. That equates to an estimated total debt of over 1.5 trillion nationwide. These exploding numbers can seem overwhelming, but help exists through restructuring and refinancing your existing debt into something workable.
When should you consider refinancing private student loans?
In most situations, when a private student loan borrower can qualify for a lower interest rate on their private loans, refinancing is a smart way to save money over the life of their loans — with little to no drawbacks. By refinancing from your old private lender to a new one with more favorable rates, you’ll simply start saving money while working with a new company.
Currently, refinance rates have been historically low and now is a great time to compare rates to see if you can save money through refinancing your student debt.
As you go through the refinancing process, it’s important to compare repayment terms and other lender-specific features to make sure that you are getting the best possible loan package.
Other benefits to student loan refinancing
If you have good credit and steady employment, student loan refinancing offers other benefits besides just lower interest rates. Consider some of these other key benefits available through student loan refinancing:
- Pay off your loans faster: Many private lenders have terms that are flexible so you can customize a repayment plan that works for you. By refinancing to a shorter repayment term (often as low as five years), you can accelerate your loan and wave those payments goodbye much sooner. Plus, you’ll save even more money on total interest by ditching your debt more quickly.
- Get a lower, more manageable monthly payment: This is easy to accomplish by refinancing to a longer repayment term and taking more time to pay down the loan. Some private student loan lenders even have terms that extend up to 20 years — allowing you to significantly drop your payments and get more wriggle room in your budget.
- Combine all your loans into one: You may have several outstanding federal and private loans with separate lenders, due dates, and payment terms. By consolidating all your student loans into one easy monthly payment, your finances become much more manageable.
- Pick a new loan servicer: If your current student loan servicer has inadequate customer support, you can secure funding through a new company with support that better suits your needs.
- Drop a cosigner: If you currently have a cosigner on your loan and through hard work and perseverance, you are ready to take on that responsibility alone, refinancing allows you to free up your cosigner and become solely responsible for your student debt.
- Choose a fixed or variable rate option: You may have a fixed or variable rate on one or more of your loans that you would like to change. By consolidating your student debt, you can create one loan package and decide which type of interest rate best suits your needs.
To compare, with a fixed rate, you have a consistent payment throughout the life of the loan. With a variable rate, you will generally have lower payments in the first years and those amounts may fluctuate higher or lower as interest rates change. With a variable rate loan, you run the risk of much higher payments if the interest rates rise by several points.
How to compare refinance rates before applying
It’s important to take the time to research and compare available terms and rates, including:
- Rates for fixed and variable loans
- Minimum and maximum loan limits
- Terms available
- Minimum income required for consideration
Take advantage of Purefy’s Compare Rates tool to receive rate quotes from thoroughly vetted lenders that are ready to compete for your business. Just answer a few easy questions and our tool will provide the interest rates you qualify for with each lender. It only takes a few minutes and won’t impact your credit score.
So you’ve found the right lender and are ready to apply
If you have ever applied for other financial loans, like a home mortgage, you know that it can be a long and involved process. The great news is applying to refinance your student debt is quick and easy. It takes only about 15 minutes to complete the application.
As you prepare to apply, it’s important to look critically at your current situation when deciding if now is the right time to refinance. There is no right or wrong answer. By refinancing existing student debt, you are often able to access better loan terms overall that allow you to customize a loan that’s right for you.
If you are ready to pursue your financial dreams, like buying your first home, saving for emergencies or retirement, or starting a family, refinancing your private student debt just may be a no-brainer.