Refinance Student Loansif It Makes Sense
Before you go running into the arms of an all-too-eager lender, know that refinancing student loans is not the right move for everyone. If someone told you this is the absolute best way to pay off student loans, they were lying. But that doesnt mean you shouldnt at least look into refinancing.
When you refinance, youre taking all your loansfederal, private, often a mix of bothto a lender who pays them off for you. And now you owe this new lender the money they just fronted you.
With a refinance, the goal is to secure a better rate and better payment termswhich means you pay less each month and for a shorter amount of time to one lender instead of more money for a longer period of time to one or more lenders.
If youre in a position to keep paying the same amount you were paying before you refinanced, even better. Because that means youre throwing more at the principal each month than you were before and avoiding more interest. Plusand heres the best partif youve got other debt outside your newly refinanced student loan, you can ramp up your debt snowball even faster once you knock out that student loan.
Remember though, youre refinancing to get a better rate and payment terms. If thats not what youre being offered, dont refinance. Its a bad deal. Make sure to do your homework and read the fine print, or you could end up deeper in the hole than you were before.
Why You Can Trust Bankrate
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our loans reporters and editors focus on the points consumers care about most the different types of lending options, the best rates, the best lenders, how to pay off debt and more so you can feel confident when investing your money.
How To Pay Off Student Loans Quickly: 10 Steps For Success
13 Min Read | Jul 15, 2022
If paying off your student loans feels way too far awayor even worse, totally impossiblehear me out. You can do this.
Lets set some expectations first. I dont have a special magic trick or life hack to help you get rid of it all in 30 days flat. Its not going to happen overnight, just like I didn’t grow overnight. It took a lot of patience to finally hit five foot, six inches.
But by following these 10 steps, you can get on a fast track to dumping your student loan debt for good. Im not going to lie to yallpaying off your student loans takes time, hard work and a whole lot of sacrifice, but its totally doable! Years ago, using these same steps, I was able to pay off my $36,000 in student loan debt in just 18 months! The faster you get rid of your loans, the sooner you can live life on your terms. So, lets make it happen!
Recommended Reading: What Is The Army College Fund
How Much You Need To Repay
Verify your loan or line of credit contract to figure out the following:
- the total amount you owe
- the interest rate that will be applied to your debt
- how youll repay your debt
- how much youll pay
- how long it will take to pay back your debt
Contact the organization that provided your student loan or line of credit if you dont have the information listed above.
Use The Grace Period To Your Advantage
Whether you have a grace period and how long it lasts with private student loans depends on the lender. The grace period is the time frame in which you aren’t required to make payments on your loans.
With federal student loans, the grace period typically lasts for the first six months after you leave school. With private loans and unsubsidized federal loans, keep in mind that interest is still charged during your grace period and will be capitalizedadded to the total amount you oweafter the grace period ends.
One way to make the grace period work for you is to make advance payments against your loans. Paying down some of the principal means less interest that accrues later. At the very least, try to make interest-only monthly payments in the grace period to cut down on what you owe.
Note that interest on student loans from federal agencies was temporarily suspended until Aug. 31, 2022, which should help reduce the total amount you owe when you graduate. This relief was also extended to loans in the Federal Family Education Loan program. Even with federal loans, it still makes sense to try to pay down federal loan principal during this period.
You May Like: How To Make Easy Money Online For College Students
Make Extra Payments Whenever You Can
In addition to paying more on your monthly bill, think about making extra payments. This can be particularly easy if you find yourself with extra cash.
- Grandma sent you a check for your birthday? Put it toward your loans.
- Got a one-time bonus at work for a job well done? Put it toward your loans.
- Tax refund? Put it toward your loans.
Spending that money on your loans now will pay off down the road when youve paid less in interest and therefore have more money to spend how you wish.
You can use this student loan refinancing calculator to estimate how much you could save.
Step 1. Enter your loan balance
If Youre Having Trouble Repaying
If you need help with repaying your Canada Student Loan, you may qualify for the Repayment Assistance Plan .
If youre having trouble repaying a provincial student loan, contact your student aid office. For repayment assistance with a loan or line of credit provided by your financial institution, contact your branch to determine what your options are.
Understand that by making your payments smaller, it will take you longer to pay back your loan. Youll end up paying more interest on your loan.
If you consider refinancing or consolidating your student loan, note that there are important disadvantages.
If you transfer your federal or provincial student loan to a private lender, you will lose any tax deductions on your student loan interest. You wont qualify for the interest free period while you’re in school and will end up paying more interest over time.
Recommended Reading: Can You Be In The Reserves And Go To College
How Can I Refinance Or Consolidate My Loans
You can apply to consolidate your loans by using the form available at Federal Student Aid. A consolidation servicer will communicate with you about any loans eligible for consolidation or let you know if additional action is required. You must continue to make payments on your loans throughout the process.
If you choose to refinance your loans through a private lender, be aware that you may lose the right to certain protections federal loans offer even though your interest rate may decrease.
Private Scholarships To Pay Off Student Loan Debt
Yes, there are actually some private grants that will help you pay off your student loans! While most of the other grants have a service requirement, these grants and scholarships have no such strings. Here are a few that you might be eligible for:
- Eligibility: Open to college graduates who are paying back student loan debt. Parents who took out student loans for their children who have graduated are also eligible!
- Amount: $2,000
- Eligibility: Anyone with student loan debt
- Amount: $10,000
- Deadline: Rolling monthly deadlines
Read Also: Can You Work Full Time And Go To College
Keeping Her Expenses As Low As Possible
After graduating from college, Becky continued living on a college students budget.
One thing that I did was I didnt change my lifestyle at all after college, she said. There was no lifestyle inflation. So I essentially didnt spend money on anything like clothing or going out to eat what I would consider discretionary categories because my whole philosophy is spending based on your goals and values.
Because she lived in a high-cost area, she did live with her parents for nine months.
It was really humbling to say, well, this decision that I made to have four years as an independent adult resulted in another period of my life that I have to live with my parents and be dependent, she said. That was kind of tough on my ego. But ultimately, it was very helpful for my financial goals.
Pros Of Paying Off Student Loans Early
- Reach other financial goals sooner. By paying off your student loans quickly, youll be able to put more of your focus into things like retirement, homeownership and savings.
- Improve your debt-to-income ratio. Getting rid of a loan lowers the amount of debt you have relative to your income, which will help you qualify for other funding, like a mortgage or credit cards.
- Pay less interest over the life of the loan. The less time you spend repaying your loans, the less interest you pay on them. By paying off your loans early, you can easily reduce the overall cost of your loans by hundreds of dollars.
You May Like: When Is College Softball World Series
Understanding Your Student Loan Repayment
When youre committed to paying off your debt as soon as possible, its helpful to understand your loans so youll know how to prioritize them. This chart shows some of the key differences between federal and private loans:
|Federal Student Loans|
|Given by the federal government||Given by a private institution such as a lender, bank, or credit union|
|Always have a fixed interest rate||Can have a fixed or variable interest rate|
|Repayments are not required until after graduation||Repayments may be required while in school or not until after graduation|
|Loans are based on the FAFSA and Expected Family Contribution||Loans are based on the creditworthiness of the students and their cosigners, if applicable|
|You do not need a cosigner||Most private lenders require a cosigner|
|You are eligible for federal benefits like forgiveness and income-based repayment plans||You are not eligible for any federal benefits|
As you can see, federal student loans have many benefits, including fixed interest rates and student loan forgiveness programs. Because of those benefits, it often makes sense to prioritize paying off private student loans first if you have multiple student loans. Youll need to know you know how much you owe and make a personalized plan for your situation.
Q If So Many Students Are Struggling To Repay Their Loans How Much Are Taxpayers On The Hook For
A. For many years, federal budget forecasters expected the student loan program to earn a profituntil recently. In its latest estimates, the Congressional Budget Office expects the program to cost taxpayers $31 billion for new loans issued over the next decades. And that figure uses an arcane and unrealistic accounting method required by federal law. Using an accounting method that calculates the subsidy to borrowers from getting loans from the government at rates well below those theyd be charged in the private sector, the cost to taxpayers is $307 billion. And that largely excludes the cumulative losses already anticipated on loans issued prior to 2019.
So To Those With Debt
Whether its college debt, car payments, a mortgage, or something else, if you have debt, and youve decided thats just a part of life, its not. Or least, it doesnt have to be.
For those who feel like you cant get out of the debt they have, its probably more possible than you think. You just need to be brave enough to face it.
To actually write it out.
Plan it out.
And then follow through.
When I finally did that, I realized I didnt need a miracle to be debt free.
I just need a little time and a little extra effort.
My plan might not play out perfectly. Other expenses and life events will likely pop up. But Im committed to not letting them stop me. Id love for you to join me.
Have your own story of debt or financial adversity because of college? Id love to hear about it! to share it with me or feel free to comment below.
John R Justice Repayment Program
The John R. Justice Student Loan Repayment Program will pay up to $60,000 in student loans for lawyers who go into public defense.
These payments will be up to $10,000 per year and require a three year commitment as either a state prosecutor or a state public defender. You can also check-in with your law school about other repayment grants for public service. Many law schools, including top programs like the Yale School of Law, offer loan forgiveness grants to alumni who go into public interest law.
You May Like: How To Determine What To Go To College For
Can You Get Grants If You Have Defaulted Student Loans
Unfortunately, defaulting on your student loans makes you ineligible for federal aid, such as federal loans and Pell Grants. If you have defaulted in the past but consolidated your debt or otherwise gotten out of default, you will become eligible for federal assistance again.
While you won’t be eligible for federal grants or aid if you’re currently in default, you may still qualify for private grants. Most private grants to pay off student loans will still be available to you even if your loans are in default, though you should always check the eligibility requirements just to be sure.
Budget Your Way Through School
College is supposed to be about learning and there are lots of things to learn about money through budgeting. Start off small. Give yourself a weekly budget and see how close you come to accurately estimating expenses. If you run out of cash on Wednesday and are forced to live off a box of cereal the rest of the week, youll get a taste of what happens in adult life when you mismanage money.
And speaking of food, that might be the one place where more money gets mismanaged than any item on your budget. Everyone needs to eat, especially college kids and whether you choose to dine in or eat out, find ways to get the best bang-for-your-buck.
Same goes for what college you choose, how much you spend on rent and whether you really need things like a car, cable TV and a $5 cup of coffee every morning. Does it really make sense to take out more student loans so you can indulge in those necessities of college life?
Or should you use better judgment and live within your budget? The benefits of learning that in college will make life a lot easier when youre on your own and having to support yourself without student loans or a check from Mom and Dad.
Also Check: How To Save For Child’s College Education
Finding Your Loan Information
If you are unsure which agency is servicing your defaulted student loan, you may retrieve your loan information from the National Student Loan Data System . This system contains financial aid information collected from schools, agencies, and other educational institutions. You will need your Federal Student Aid ID information to access your account. Or, you may contact the Federal Student Aid Information Center .
How Did You Acquire Over $80000 In Debt What Did That Debt Consist Of
My wife went to college during the credit crunch and picked a very demanding four year degree, nursing. Due to the rigorous course load, Tori couldnt work during school. She took out loans each semester to have enough money to make it until the next semester.
Unfortunately, due to the circumstance, she had to take out variable rate private loans at very high interest rates and they accrued interest until she graduated with over $80,000 in student loan debt.
You May Like: How Much Is College In Canada
Can Grants Be Used Toward Federal Student Loans
Yes, there are many different grants to pay off student loans available, and most grants can be used towards both private and federal loans. While some scholarships and grants are only available to current students with tuition bills, there is plenty of grant money set aside for students and graduates with loan debt.
Start Early With A Part
Getting a part-time job while attending college is one way to keep college debt in check, because you can use those earnings to get a head start on paying down your balance.
Lets say youre able to work a part-time job that allows you to put away $500 a month. In a year, thats $6,000 you can put toward paying off your loans. Whats more, you can earn up to $7,040 a year without affecting your eligibility for need-based financial aid.
Check your schools resources or career center to see if theyre hiring for any on-campus jobs. Typically, on-campus jobs tend to be more understanding of unusual or busy class schedules.
Also Check: How Much Can Parents Borrow For College