As I have previously mentioned on this website, refinancing your student loans can be a great way to take control of your student debt situation. Indeed, refinancing student debt can lower your monthly payments, and decrease the amount of interest you need to pay over the life of your loans. And there are certain types of people who would benefit the most from refinancing their student loans
Of course, student loan refinancing is a major step in your student debt story. And it is true that in order to refinance your student loans, you will have to do your research, fill out forms, provide a lot of information, and complete other tasks. However, there are certain individuals who should absolutely consider refinancing their student debt, since they will realize numerous benefits from obtaining lower interest rates.
You should definitely consider refinancing your student loans if you do not think you will be repaying your student debt for the rest of your life. As will be mentioned in future articles, some people have massive student loan burdens, and it does not make sense for these people to refinance student debt. Indeed, these people might consider an income-driven repayment plan to best pay off their student loans. However, if you expect that you will be able to pay off your student loans in five to ten years, even if you might need to make some sacrifices along the way, then you should consider refinancing your student loans.
As will be teased out in future articles, one of the main drawbacks of refinancing student debt is that refinancing may eliminate your eligibility for income-driven repayment options. However, if you think you are going to pay off your student loans in a relatively short period of time, it s unlikely that an income-driven repayment plan would be right for you. Sure, such a repayment plan would lower your monthly payment amount, but the additional interest you would need to pay over a longer period of time would not be worth it. As such, if you think you can retire your debt in a relatively short period of time, you do not need to keep income-driven repayment plans as an option, and you should definitely consider refinancing your student loans.
Another group of people who should look into refinancing their student debt are individuals in the private sector. Many public-sector employees are eligible for debt forgiveness through Public Service Loan Forgiveness. Under this program, individuals working for certain public-interest employers only have to devote a set percentage of their discretionary income to student loans each month. After ten years, the remaining student loan balance is forgiven. Of course, if you have a small amount of student loans, and this debt has a high interest rate, you might still want look into refinancing student debt.
Nevertheless, refinancing makes the most sense for private-sector employees, because Public Service Loan Forgiveness is not available for individuals who work for private businesses. Of course, if you have a large amount of student debt, you might be better off not refinancing even if you work in the private sector, since you might want to take advantage of an income-repayment plan. However, because of the limitations on debt forgiveness for individuals in the private sector, if you work for a private company, you should seriously consider refinancing your student loans,
In addition, the interest rate that you currently have on your student loans will have a huge impact on whether refinancing makes the most sense for you. When I graduated from law school, the effective interest rate on my student debt was around seven percent, since I had some debt that had an interest rate as high as 7.8 percent and other debt that had an interest rate around 3.25 percent. Some people have emailed me over the past several months to relate that they have interest rates even higher than this! When I first entered the workforce, interest accrued on my debt at a rate of $31 a day. Some people who have more student debt than I had might have loans that accrue interest at a even higher rate.
If your student loans have an effective interest rate in excess of five percent, you should definitely consider refinancing student debt. Many student loan refinancing companies offer rates around four to five percent, and some offer even more favorable rates to qualified borrowers. Refinancing your student loans to an interest rate even one percent lower than your current interest rate can save you many thousands of dollars over the life of the debt. As a result, anyone with debt that has high interest rates should definitely consider refinancing their student loans.
This website will soon discuss some factors you should consider when selecting a refinancing company. However, if you want to start your refinancing journey now, Student Debt Diaries recommends that you refinance your student loans with Splash Financial. In addition, if you use this link to start the refinancing process, you may receive a generous welcome incentive, and we may receive a benefit that can help keep the lights on at Student Debt Diaries! Of course, it costs nothing to do research, so definitely check out Splash.
In the end, certain people should definitely consider refinancing their student loans. And if you think you can pay off your student debt in the short term, work in the private sector, or have high interest rates, you should look into refinancing student debt.