If you are feeling overwhelmed by your student loan debt right now, you are not alone. I was here. I understand that this can seem like a huge burden that you will never let go.
But listen: there is light at the end of the tunnel! There are many ways to step up debt repayment. In addition to staying on a budget, earning extra income from another job or sideline, selling things, cutting expenses, and snowballing in debt, a lot of people use refinancing.
Let’s talk about what refinancing is and if it’s the right choice for you.
What is student loan refinancing?
Refinancing student loans involves switching to another lender for a better interest rate or faster repayment, or both.
If you qualify, the new lender basically pays off your current loans and gives you a better deal with better terms, which is different from loan consolidation. Refinancing gives you a new rate on a combination of federal or private student loans, while consolidation means combining your loans so you only have one payment (it doesn’t actually save you money. money).
Should You Refinance Your Student Loans?
Not all refinancing options are created equal, so you should be careful about the new terms you sign up for. You should only refinance your student loans if:
1. The change is completely free – This means that there are no administration fees or set-up costs which would cancel out the money you would save later. If you have to pay to refinance, it’s best to spend all that money on paying off your debt.
2. You don’t end up with a higher interest rate – The goal of a refi is to get a lower interest rate. If you get a lower monthly payment, but a higher interest rate, that defeats the goal.
3. You don’t get a longer repayment period – It just means that you will be spending more time in debt, while your goal is to get out of debt as quickly as possible.
4. You don’t need a co-signer – Co-signing for a refinance may seem to make things easier at the time. But mixing finances with relationships usually ends up being a pain for everyone involved.
5. You stay motivated to keep paying off your debt – When your loan situation gets easier, it can be tempting to go on autopilot because it feels like some of the weight has been lifted. But this mindset will not allow you to get out of debt quickly.
Still not sure if refinancing is the best option for you? These two free minutes quiz will help you determine if you are eligible for refinancing your student loans and help you find a trusted resource to get the job done!