When you’re in college, keeping track of your finances becomes second nature, because most students are living on a fixed – if not altogether small – personal income. But once you leave school, you’re often faced with the reality of paying back your student debt, and at the same time finding your way in a new career.
While the reality of repaying student loans on a new salary can be challenging, there are a number of ways you can get your finances in order. From student loan consolidation to a wide range of repayment plans, sometimes your options for repaying your loans feel nearly limitless.
Yet, according to one report quoted by CNN in 2016, roughly eight million Americans – or one-third of all borrowers – are missing out on an opportunity to lower their student loan interest rates through refinancing. And since we live in a time when every penny matters, you might consider this as your best option for making your student loans more affordable and getting you out of debt much more quickly.
Put simply, student loan refinancing happens when a borrower takes out a new loan with a lender that pays off a previous student loan and offers new repayment terms and conditions. By refinancing your student loans, you’ll get a new interest rate from your lender, and your payments on your loans will be adjusted based on the agreement you make with the lender.
In most cases, to become eligible for student loan refinancing you may need to meet the following requirements:
However, even if you don’t meet all of these requirements, you may be eligible for refinancing anyway, especially if you have federal student loans. And here are the reasons why it might be working checking out your refinancing options.
When you’re trying to finish up school, you may have taken out loans that aren’t necessarily aligned with your future finances. Whether it’s due to high fixed interest rates or unfavorable variable interest rates, you could be setting yourself up for a tight budget after graduation.
While you may have to meet a few requirements to refinance your loans, you can usually obtain a loan with a lower interest rate than you currently have. In the end, a lowered interest rate could end up saving you hundreds or even thousands of dollars over the life of the loan, which makes it wise to explore the option as a way to make your loans more affordable now and in the long run.
Unless you already signed a long-term agreement on your loans, you probably obtained the standard federal or private loan, meaning it will need to be repaid within 10 years after graduation. Yet, through refinancing, you could give yourself additional time to repay your loans, which will ultimately lower your monthly payments.
You should also keep in mind that with lowered interest rates come lower monthly payments as well. So, between the lowered interest and the increased length of time to pay off your debt, you could see a substantial reduction in your monthly payments that gives you more money for other types of expenses.
Whether it’s through the help of parents or other trusted co-signers, many borrowers rely on the support of another borrower with good credit to get a favorable interest rate and approval for a loan. However, once you’ve started putting down roots in your new career, it may be time to set your co-signer free from this financial obligation that could be impacting their credit.
Through refinancing, most lenders will allow you to refinance your loans in order to release any co-signers who were part of any previous student loans, in addition to giving you a better interest rate. Of course, this often means you’ll have to meet similar requirements to those listed above – but it could help you start building your own credit history and boost your own credit score at the same time.
During your lifetime, you’re not always going to be satisfied with your lender, and this may already be true with your current student loan lender. If you find yourself looking for other lenders for whatever reason, sometimes it’s worth switching who you borrow money from for more than financial reasons.
From poor customer service to limited refinancing options, there are plenty of things that could motivate you to begin your search for a new lender. In addition, you should also know that today’s banks and creditors are competing for your business, so it might be worth making the move just to find a better fit for you as a borrower.
If you’re considering refinancing your student loans, our experts can help you through the process of exploring your options without making the full commitment right away. Just call (800) 771-6358 to speak with a Loan Forgiveness specialist over the phone, or fill out our online form for a quick response from our team.