I refinanced my student loans about 3 months ago (December, 2015). I spent about three weeks researching various companies I could potentially refinance through, primarily working off of this list. I compared interest rates based on my current rates, other offers, and repayment terms.
It took me a long time to research the various companies because this is a very large decision. I have been out of school for about 2.5 years, which means I am very early into my repayment. Also, because of the timing of my schooling, I was unable to participate in graduate school grants and subsidized loans. And I chose to go to an out-of-state graduate program. I definitely don’t regret this decision from an educational standpoint because my grad program was amazing. It was, however, a financial blow in terms of my debt (slightly under half of my debt at this point).
If you Google “Should I Refinance My Student Loans,” you’ll get a bunch of various lists, many of which have been written by refinancing institutions. Thankfully, the institutions that show up higher on the list have better ratings and are more upfront about what refinancing your student loans truly means. There are several benefits to refinancing your student loans. There are also some risks to refinancing your student loans.
- Lower interest rates
- Lower monthly payment
- A single loan
- Different life of loan options
- Faster or shorter repayment (depending on term of loan)
- Decrease in interest paid
- Variety of loan terms
- Variable or fixed interest rates
- Remove co-signer
- Add co-signer
- No ability to participate in federal loan programs, such as loan forgiveness or income-based repayment
- Loss of possible military benefits
- Loss of possible waiver of loans (fraudulent school, etc.)
- Loss of participation in employer contribution programs
- Reduced ability to defer loans (various by lender)
- Higher minimum payment (varies by loan term)
- Often cannot switch between payment plans/terms
- Variable interest rates may increase
- Higher interest rates (longer term options)
I spent a lot of time contemplating this decision but ultimately the part that sold me on the decision was the difference in interest I would be paying overall. The different ended up being $2,215.53. I had some reservations about the loss of stability with my federal loans and the various attached programs. I did not get a degree in a qualifying forgiveness program, plan to pay off my loans prior to qualification, and have no history of military service (nor does my spouse). The only major loss I could foresee is the ability to change my repayment terms through the federal loan program, and the refinancing provider I selected offers several options if a short-term deferment was needed due to financial difficulty.
My goal has always been to pay off all my debt within 5 years (2020), but refinancing my student loans has helped me with this goal by reducing the total interest I will pay. The $2,215.53 difference allows me to reach my goal an additional two months sooner.
Have you refinanced your student loans?