Every student debt borrower has likely heard about refinancing options at one point or another. Indeed, many companies advertise refinancing programs on the internet, and you’ve probably even seen a few of these advertisements on this website. In addition, we all likely know someone who has refinanced their student loans, and I am sure many of you have already considered whether you should refinance your student debt.
I personally did not refinance my student loans during my student debt repayment saga. I paid off my student loans quickly, and by the time I became educated about refinancing options, I had already paid off my high-interest student loans. In addition, I always wanted to remain eligible for income-driven repayment options in case some change in my life made one of these repayment plans more appropriate for my situation. However, I have a number of friends who refinanced their student loans, and they tell me constantly how great refinancing is. All told, most student debt borrowers should consider refinancing, and there are a few things you should evaluate when deciding if refinancing is right for you.
Student debt refinancing is when a company buys up your student debt and permits you to pay off your student loans with a more favorable interest rate. This is essentially the same as credit card debt refinancing, mortgage refinancing, or any other type of refinancing that you might have experience with. While there used to be only a few players in the student debt refinancing arena, there are now a number of companies offering refinancing options. As such, it is important to do your research when deciding whether to refinance your student loans and which refinancing company you should choose.
One group of people that would likely not benefit from student debt refinancing is individuals taking advantage of income-driven repayment plans. Generally, student debt is no longer eligible for income-driven repayment programs if it is refinanced, so even if there is a chance you might want to take advantage of an income-driven repayment plan, refinancing may not be right for you. However, if you are leaving a public-interest field, or you do not foresee staying in the public sector long enough to obtain debt forgiveness (usually 10 years), then you might consider refinancing.
In addition, if you already have low-interest student loans, refinancing might not be right for you. Some individuals who borrowed student loans from various banks could have interest rates as low as three or four percent. Indeed, during my student debt repayment saga, I had one student loan that only had an interest rate of 3.25 percent. Although there are some student loan refinancing companies that offer refinanced rates around this percentage, many companies do not. As a result, if you have low-interest debt already, refinancing might not be right for you. Indeed, as I have previously mentioned on this website, if you have low-interest student debt, you might not even want to pay off your student loans early.
There are a number of people who would benefit from refinancing. If you work in the private sector, and are not benefiting from an income-driven repayment plan, then refinancing might be right for you. This is especially true if the interest rate on your student debt is around five percent or higher, since refinancing companies usually offer interest rates that are better than this. As such, you could save thousands of dollars in interest by refinancing, and you would be wasting money if you do not refinance your student loans.
Of course, not everyone is eligible to refinance their student debt. One of the reasons student debt has traditionally had such high interest rates is since it is not secured by anything like a mortgage or other types of debt. Since refinancing companies are taking somewhat of a risk by offering to refinance student debt with no collateral, some individuals will not be eligible for refinancing.
Generally, you need to have a solid credit history in order to refinance your student debt. In addition, you also typically need to have a strong employment background, and need to have a high enough income to demonstrate that you will be able to pay off your student loans at the refinanced rate. Usually, the better your background the lower your refinanced rate will be, so it is important to boost your credentials before refinancing your student loans.
There are many student loan refinancing companies out there, and I am sure that you have seen numerous advertisements for various student debt refinancing companies over the years. There are also a number of things to assess when choosing a student loan refinancing company. The most important consideration is the interest rate that is being offered, and some refinancing companies offer interest rates as low as three percent to some qualified borrowers. In addition, some refinancing companies offer cash incentives to borrowers who refinance their student loans, and it is possible to receive hundreds of dollars in cash back after agreeing to refinance your student loans.
Although everyone should do their own research when choosing a student loan refinancing company, Student Debt Diaries recommends that borrowers refinance with Splash Financial. I am sure that many of you have seen advertisements for this company, and some of you likely already know someone who has refinanced with Splash. In any case, Splash Financial is one of the industry leaders in student debt refinancing, and they are a solid company. In addition, if you use this link to refinance your student loans with Splash, we will get an incentive that we can use to keep the lights on at Student Debt Diaries! Furthermore, if you refinance your student loans through the link above, you will receive a generous cash incentive as well.
All told, if you do not rely on an income-driven repayment plan, you should seriously consider refinancing your student loans. Refinancing will likely help you reduce the amount of interest you pay on your debt, and there are other benefits to refinancing as well.