The average student loan debt balance is $30,000 at an average 7% interest rate. This results in the typical graduate paying thousands in interest costs over a decade. Refinancing student loans can unlock lower rates saving significant money over the loan’s lifetime. This guide explores qualification requirements and strategically leveraging refinancing.
Refinancing Eligibility:
Good to excellent credit (660+ score) and adequate income relative to debt levels make it possible to qualify for refinancing. Having a cosigner further improves the chances of approval.
Compare Lender Rates:
Rates vary widely by lender ranging from 3-8% fixed rates typically based on your credentials as an applicant. Cast a wide net across multiple lenders to determine where the best offer is.
Factor in Upfront Costs:
While interest rates are critical, also compare lenders based on factors like origination fees and discounts for automatic payments when making the refinancing decision. Weigh any upfront costs against long-term savings.
Consider Impact of Variable Rates:
Some lenders offer lower initial variable rates that fluctuate over time. Make sure to evaluate the level of rate variability you are willing to take on before giving up the certainty of a fixed rate.
Time Strategic Rate Locks:
volatility. Lock in rates strategically when terms are favorable.
FAQs:
Q: Can federal loans get refinanced?
A: Federal loans can get refinanced into private consolidation loans but this strips out federal borrower protections.
Q: How much can refinancing save?
A: Savings vary substantially but most borrowers reduce their rates 1-4% through refinancing and private market competition, saving thousands.
Q: What are the risks?
A: You lose federal loan safeguards and any pandemic-related payment freezes. Variable loan rates also carry risk of increases over time.
Strategically refinancing student loans to preferred private lenders can lead to substantial interest savings over time. But you must weigh giving up federal borrower options too.