Refinance My Student Loan Debt – Student loan consolidation can save you time and money. Find out how to consolidate and the pros and cons of each route.
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Refinance My Student Loan Debt
Together, they borrowed $1.5 trillion to get their degrees, and paying them back hasn’t been easy. About one in 10 will default on their student loans, and while the average repayment time depends on the amount of debt, it’s safe to say it’s likely to take at least 10 years and could be as long as 30 years.
Should I Consolidate My Student Loans?
Members of the class of 2019 who took out student loans owe an average of $31,172 with payments of just under $400 a month. This is a significant and unwanted graduation gift, so it’s important to know how to minimize the damage.
If all the money you borrowed was federal loans, you may find easier repayment options by applying for a direct consolidation loan.
If some or all of your student loans were from private lenders, you’ll need to use a refinancing program to achieve similar results.
Consolidation is one way to make student loan repayment more manageable and possibly less expensive. You combine all your student loans, get one big consolidated loan, and use it to pay off all the others. You will be left with one payment to a lender each month.
Should I Consolidate My Student Loans? A Quick Guide — Tally
A typical student borrower receives money from federal loan programs each semester in school. It often comes from different lenders, so it’s not unusual to owe 8-10 different lenders by the time you graduate. If you continue to borrow for graduate school, add another 4-6 lenders to the mix.
Each student loan has its own repayment term, interest rate and payment amount. Keeping such a schedule is difficult and is part of the reason many have failed. This is also why student loan consolidation is such an attractive solution.
Federal loans can be consolidated in the Direct Consolidation Loan Program. You consolidate all of your federal student loans into one fixed-rate loan. This rate is obtained by averaging all federal loan interest rates and rounding the interest rate to the nearest eighth of a percent.
While this method does not reduce the interest on federal loans, it leaves all repayment and forgiveness options open. Some lenders allow you to lower your interest rate by making direct payments or by making on-time payments over a longer period of time.
Should I Refinance My Student Loans?
Student loan refinancing is similar to a direct consolidation loan program in that you consolidate all of your student loans into one loan and make one monthly payment, but there are important differences that you should look at before taking out a decision.
Refinancing, sometimes called private student loan consolidation, is primarily for private loans and can only be done through private banks, credit unions, or online lenders. If you have borrowed from federal and private programs and want to consolidate the entire lot, you can only do so through a private lender.
The main difference between refinancing and direct loan consolidation is that with refinancing, you agree to a fixed or variable interest rate that must be lower than what you would pay for each loan individually. Lenders take into account your credit score and whether you have a co-signer when determining your interest rate.
However, if federal loans are part of your refinance, you lose the repayment options and forgiveness programs they offer, including deferment and forbearance. These last two points can be decisive if you have financial problems to repay your loan.
Student Loan Cash Out Refinance Program
The average college graduate has nearly $8,000 in credit card debt. Now that your student loans are forgiven, we’ll help you with your credit card, too.
There are many good reasons to consolidate through a Direct Loan Consolidation Program, not the least of which is that it keeps you alive with several income-based plans such as REPAYE (Pay As You Earn), PAYE ( Pay As You Earn), IBR (Income Based Repayment) and ICR (Income Conditional Repayment).
There are two sides to every story, and here’s another side to consider before starting a direct loan consolidation program:
If you’ve been missing payments because you’re struggling to keep up with multiple loan services and multiple repayment dates, consolidating or refinancing is the right option. Making one payment each month instead of a lump sum makes life easier.
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You can go through a straightforward loan consolidation program because it allows you to keep the door open to income-driven repayment options that result in lower monthly payments.
However, it is important to know that if your payments are part of qualifying for any forgiveness program, the clock starts again when you consolidate s. For example, if you made three years of qualifying payments for Public Service Loan Forgiveness and then consolidate your loans, you would lose three years of qualifying payments and start over.
The big question for most borrowers is can they afford the monthly payment? Consolidation and refinancing are the remedies for this: making one payment that won’t break your budget every month.
However, if you’re making enough money now and are very committed to paying off your loan, the fastest and most effective way is to use a regular repayment schedule and get it done in 10 years … or less!
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Max Fay has been writing about personal finance for the past five years. His expertise is in student loans, credit cards and mortgages. Max inherited a genetic predisposition to be tight with money and free of financial advice. It was published in every major Florida State University newspaper. He can be reached at [email protected].
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Our goal is to give you the tools and confidence to improve your finances. Although we receive compensation from our partner lenders, who we always identify, all opinions are our own. When refinancing a mortgage loan, the total financing costs may be higher over the term of the loan.
There are several possible end goals for student loan refinancing. For example, you may want to get a lower interest rate, lower your monthly payments, or pay off your loans faster.
Refinance Student Loans: 2022 Top Award Winner For Refi
If your monthly student loan payments are too high for you to easily afford, you may want to consider student loan refinancing to extend your repayment period. This can lower your payments and reduce the strain on your budget.
Plus, student loan consolidation with refinancing leaves you with just one loan and payment, which can make your payments easier to manage.
But remember that choosing a longer repayment term means you’ll pay more interest over time.
Tip: It’s usually a good idea to choose the shortest repayment term that allows you to save the most interest. Choosing a shorter term can also get you a better interest rate.
How To Lower Student Loan Payments
If you want to know how competitive your credit is, the credit score tool below can help. Just enter your APR, credit score, monthly payment, and remaining balance (estimates are OK) to see how your loan stacks up.
The student loan interest rate is one of the biggest factors in determining how much you will actually pay for your loan. If you have a particularly high interest rate, you could end up paying thousands of dollars in interest.
However, depending on your credit, you may be able to lower your student loan interest rate by refinancing. This can save you a significant amount in interest costs and potentially help you pay off your loans faster.
For example: If you had a $25,000 loan with an interest rate of 7% and a 10-year repayment term, you would pay $9,833 in interest over the life of the loan.
Consolidation Versus Refinance: Which Option Makes More Sense?
However, if you refinance to a 5% loan with a 10-year term, you’ll save $3,013 in overall interest costs.
Use our student loan refinancing calculator below to see how much you could save by refinancing your student loans.
By refinancing your student loan with % interest, you can save, pay an extra $ each month and pay off your loan no later than . The total cost of the new loan is $.
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