Life After Debt: Is Student Loan Refinancing an Option?
As of 2019, the cost of attending college in the United States is at an all-time high. For those planning to attend college, the bill due after graduation can be difficult to digest. According to a national survey, 20% of 2018 graduates owe $20,000-$30,000 in student loan debt (with another 23% leaving with $30,000-$50,000 of debt).
It’s the second-highest consumer debt category, and has donned memorable hashtags such as #debtsentence and #MyDebtCouldBuy that speak to the impact student loans have had on the millennial generation and beyond.
“Student debt is [currently] about $1.5 trillion. As other areas of the economy keep getting better, student debt keeps getting worse.” –Chris Dlugozima, education specialist with Greenpath Financial Wellness.
And student loan debt doesn’t disappear. With the exception of the Public Service Loan Forgiveness Program, your student loan debt stays with you until fully repaid and generally cannot be discharged during bankruptcy.
Borrower’s Financial Relief: Is Student Loan Refinancing the Right Option?
The short answer is: possibly. Student loan refinancing is a good option for many borrowers, but is not right for everyone. Student loan refinancing replaces your original loan (or multiple loans) with a new loan. The goal of refinancing is to simplify your payments and/or achieve a lower interest rate, which can reduce your lifetime interest costs and your monthly payment.
Here are a few questions to consider before refinancing your student loans:
How do the rates compare? Because refinancing student loans means replacing the existing student loan with a new one, this gives you an opportunity to shop for a lower interest rate and get a better deal.
What is your current credit score? When you apply for refinancing the lender will consider your credit score as part of the new interest rate.
How much is your student loan payoff amount? Your loan payoff amount is the total payment you’d need to pay off your student loans in full, including any interest you still owe.
Will your monthly budget change if you refinance? Depending on your current payment plan, refinancing may change your repayment terms and monthly payment amount. If you are currently utilizing a special payment structure such as an income-driven repayment plan, try using our Student Loan Refinance Calculator to see if the new refinanced monthly payment would fit your budget.
Is it possible you’ll need federal student loan repayment options in the future? If you struggle with payments, have uncertain or unstable sources of income, or an unpredictable financial situation in your future, then it might not be the right time to refinance your student loans. When you refinance you may receive a lower interest rate, however you also forfeit the opportunity to take advantage of federal income-based repayment plans, deferment options and loan forgiveness programs in the future.
Frequently Asked Questions About Student Loan Refinancing
FAQ’s are answered based on the credit union’s Student Loan Refinancing option.
What Type of Loans Can Be Refinanced?
It depends on the loan servicer you choose, but the credit union offers student loan refinancing for:
Federal Education Loans
· Federal Family Education Loan Program (FFELP)
· Subsidized or Unsubsidized (aka Stafford Loan)
· Grad or Parent PLUS William D. Ford Direct Loan Program Subsidized or Unsubsidized (aka Direct Stafford Loan)
· William D. Ford Direct Loan Program Undergraduate, Grad or Parent PLUS
· Perkins, Nursing or Health Education Assistance (HEAL)
Private Education Loans
Institutional Education Loans
How Much Can I Borrow?
The student loan refinancing solution offered by the credit union, in partnership with Student Choice, allows you to refinance any amount from $5,000 to $150,000.
If I go back to school, can I put my loans into deferment?
Unfortunately, we do not offer an in-school deferment option. This student loan refinance option may be the right fit if you have completed your education and do not plan on returning to school.
Am I eligible to refinance?
While there are general criteria with most loans (credit score, debt-to-income ratio, ability to repay, etc.), each lender may have additional qualifications. For our refinancing program, these include:
· Be a U.S. citizens or permanent resident who has graduated from an approved public or private not-for-profit school (a bachelor's degree is the minimum required)
· In repayment or grace on one or more outstanding private or federal student loans
· Able to pass a credit and income check (A cosigner may be necessary in order for you to meet credit criteria, and may also help you qualify for a lower rate)
· Eligible for credit union membership (you may apply without being a member of the credit union, but you will need to become a member in order for the loan to be funded)
Student Loan Refinancing: You Don’t Have to Do It Alone
The credit union and Student Choice believe in giving you the resources to inform and educate yourself as a borrower, but you’re never alone in the process. If you have questions about student loan refinancing, contact a Student Choice representative at 866-686-6564.
The credit union believes in empowering members. From refinancing your student loans to saving up for that special trip, we’re here to help you achieve your financial goals.