Student loan refinancing is really popular so let’s see what it actually does and if it’s right. I wish I knew more before taking out student loans but this would have been so helpful if you can talk about it amy thank you very much for your question i feel great graduates kind of get stuck where they’re like I have personal loans and I federal debt and it’s interest rate and i don’t know what to trust me i was there because i had a loan with sally mae i had a ton of federal loan i also had loan through university.
So it looks like where do you start when it comes to considering refinancing things first I want to break down the difference between student loan refinancing and student loan debt consolidation there is, So if you’ve heard of the term student loan consolidation only happens at the federal level so with student loan consolidation . you can Consolidate all your federal loans and assume you have multiple loans yourself
had like 10 federal loans, so it would merge all those loans into one consolidated federal loan and then you will have one interest rate in one payment. Makes sense now instead of multiple loans with multiple interest rates.
Debt refinancing is different in that you can combine federal loans and Personal loans combine them together into a new loan refinance loan you will have an interest rate an estimated monthly payment and you.
The largest student loan lender you are working with is Just to clarify the difference between consolidation and refinancing. The terms are fine so you can’t refinance your loans through the federal government
programs but you can refinance your loans through a private lender, there are a ton .There I can’t believe how many ads there are for student Debt Refinance Now But The Big Thing You Might Want To Consider If You Think You Might Be A Candidate For Student Loan Refinancing, Let’s Move On, this Student Loan Refinancing Could Be Good If You Have Good Credit.
For those who receive a consistent monthly income who have a federal and private student loans and more this and those who want a monthly Paying off one loan instead of multiple is now student loan refinancing
Not really a good option for people who want to access public service loans sorry program i can cover it in another video if you are not familiar with and it is not good for people who have bad credit or who have
unexpected income or those who already have loans with low interest rates so.
The Complete Reason You Might Want to Combine and Refinance Your Student Loans, If you have high interest rates on those student loans and you want We aim to pay less in all interest to reduce the amount of interest you pay. So that we never have to pay interest again, what’s interesting Here I’ve checked the current interest rates for federal student loans and Direct unsubsidized and subsidized loans for undergraduate students are currently at four point five three percent direct
Unsubsidized loan for graduates is six minus eight percent and then plus minus seven to the decimal point minus eight percentage so to give you an idea of what it’s like about ten years ago I took out federal when I was in college Between 2007 and 2011 unsubsidized loans and subsidized loans and then interest.
The rate of unsubsidized loans as an undergraduate was 6.8% and the subsidized loans were at four and a half percent so the direct Unsubsidized loans are now less than when I was in school where it is now, it’s dropped a few percentage points so you can student loans that are as high as nine to thirteen percent and you are probably looking to refinance and can lower that percentage rate to like 6% but here’s the thing.
Let’s take a look at an example. Let’s say you have a hundred.thousand dollars in student loan debtAnd your current interest rate is 10. so that means you’re paying ten thousand dollars in interest on that student loan debt on top of paying back your principal I mean that’s that’s pretty crazy right so let’s say you check out a refinancing lender who’s offering to pay you a seven percent interest rate so instead of 10 percent you’d pay seven percent so that’s three percentage points less than what you’d be paying so you’d be paying what seven thousand dollars in interest per year so you’re saving yourself three thousand dollars but here’s the thing three thousand dollars does not solve a hundred thousand dollar problem you still have to come up with a debt free plan you still have to make it a point to pay it off as quickly as possible by putting extra payments towards your debt yeah if I saw three thousand dollars on the ground heck yeah I’m picking it up and so you could move the needle like.
This much by refinancing but know that refinancing is not the secret to getting out of debt it’s not the end-all to your debt free journey you still have a lot of headway to go and if you work the steps of getting out of debt saving and budgeting actually four steps to my debt free planets in my online course of freedom project and that is having a money mindset saving for emergencies budgeting every single month and then picking a method to paying off debt I’ll link to that in my description below but if you’re working that plan just like I did then you can pay off your student loan debt without having to refinance I personally did not refinance .
I can see how in some situations like the example that I pointed out that you may consider refinancing and that’s fine and all you can do that and also you have to take these other steps so that student loan refinancing in a nutshell It works for some people in other cases it’s just like roll up your sleeves and get to work and start paying down the debt otherwise I think there are some situations that you could use refinancing but remember to work your debt free plan first.