3 Ways to Save Money on Student Loan Refinance

Refinancing your student loans can make sense if you’re able to lock in a lower interest rate and extend your loan term. Doing so could save you money on monthly payments and help you pay off your debt faster. After graduation, many recent college graduates struggle to repay their student loans. In fact, the average Class of 2021 graduate with student loan debt has $29,975 worth of obligations. That’s why refinancing is one of the best ways for millennial graduates to ease their repayment burden without sacrificing long-term financial security. Read this step-by-step guide to learn more about refinancing your student loans and how it can benefit you as a young professional with student debt

What is student loan refinancing?

Student loan refinancing allows you to consolidate and restructure all your existing debt into a single new loan at a lower interest rate. Unlike a federal student loan consolidation, which only applies to existing federal loans, refinancing allows you to use a private lender to get a new, single loan to repay multiple types of debts, like federal and private student loans, and auto loans, credit card debt, and mortgage debt. Though refinancing your loans can help you save money on interest, it comes with drawbacks, too. You’ll likely have to extend the length of your loan, which could affect your ability to buy a house or qualify for certain jobs. And if you don’t find a lower interest rate, refinancing isn’t worth it.

Check Your Eligibility For Refinancing

When considering refinancing your student loans, it’s important to be sure that you’re actually eligible. First, check to see whether or not you have private student loans. Federal loans can only be refinanced under certain circumstances, including a complete and thorough review of your financial situation by the Department of Education. In order to have your federal loans re-evaluated, you must submit a new application for each loan that you would like to restructure. If you have private loans, you can apply for refinancing at any time. However, you’ll want to shop around for the best refinancing rates and plan types to ensure that you get the best deal.

Earned Income and Cosigners

When refinancing, make sure to ask your lender about the terms they offer to individuals who are employed and those who are not employed. The circumstances surrounding your employment will determine how much you can qualify to borrow. For example, if you’re employed, your lender might require that you make a certain amount of monthly income. Some lenders also require that employees make a certain amount (often, around $25,000 per year) consistently over a set period (often one or two years). If you’re not currently employed, you might be able to get a cosigner to help you secure a loan. A cosigner is a person who agrees to take on the responsibility of repaying the loan if you are unable to do so for any reason. Cosigners are often family members who have established good credit history and can demonstrate that they can repay the loan.

Selecting a Refinancing Options

The first thing to do when considering refinancing your student loans is to compare rates from various lenders. You can do this through a service like Credible, which compares multiple companies and refinance options for you. In addition to the rate, you should also consider the type of repayment plan that comes with each deal. Fixed and variable rate options will dictate how much you repay over the lifetime of the loan. Conditional repayment plans will allow you to repay your loan over a shorter period, while extended repayment plans will let you repay your loan over a longer period of time. Finding a balance between these two options can help you pay off your debt faster while minimizing the monthly payment amount.

Wrapping up: Is Student Loan Refinancing Worth It?

Student loan refinancing can help you save money on interest and extend your loan term, which will free up money in your budget that you can use for long-term financial goals. However, not all refinancing offers are created equal. To find the best deal for you, you’ll want to shop around and compare rates from lenders who offer variable and fixed-rate plans with various repayment options.

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