If you’re like most recent college graduates, student loan debt is one of the main financial stressors you face. There was over $1.56 trillion in student loan debt at the end of 2018. This debt is having a big impact on our economy and our spending habits. So what can you do? Today, we’re going to discuss student loan refinance — how does it work and is it right for you?
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My boyfriend refinanced his student loans with SoFi in 2017. I sat down and discussed the process with him. You can read about his experience and find out how you can use SoFi to refinance your student loans as well (and get a little cash when you use this code >> sofi.com/share/187316 !)
How does student loan refinancing work?
The majority of student loan debt is financed through the Department of Education with federal financial aid. When this debt is issued, it’s usually in a bunch of smaller loans that have individual interest rates. Refinancing basically pays off all those smaller loans by taking out one big private loan – usually with a lower interest rate. Technically you are consolidating if you combine multiple smaller loans into a larger one.
Refinancing can be done on both federal and privately held loans, but the actual refinancing can only be done by a private company. The Department of Education does not offer refinancing services. This means if you refinance, you’ll lose the option of programs like income-based repayment plans.
Why would I refinance my student loans?
Refinancing your student loans may save you money in interest in the long run. If you’re able to get a lower rate on a private loan than you have for your existing student loans, you would end up paying less in interest each month. This could result in a lower monthly payment. That extra savings on the interest could also be used to make larger principal payments to knock out the debt faster.
You might be better off refinancing your student loans if you are able to get a good interest rate on a private loan. Generally, refinancing student loans requires good credit, enough income to back up the new monthly payments, and a history of paying your loan payments on time, so make sure to consider your current credit situation before applying.
Is student loan refinancing right for me?
In general, refinancing your student loans is a good idea if you are able to secure a lower interest rate on a private loan. If your current student loans have high-interest rates, or variable interest rates, setting them at a lower fixed rate will save you money over the life of the loan.
If you currently take advantage of federal repayment plans or plan to in the future, then refinancing is probably not for you. Once you refinance with a private loan these payment options are no longer available. If you meet the qualifications of student loan forgiveness and plan on working towards that, refinancing would also not be for you.
When deciding if you want to refinance your student loans, you want to make sure to actually run the numbers to make sure you will be saving money in the long run. There are great student loan payment calculators you can use to figure out what your monthly payment would be under different circumstances. Compare your current student loan situation to your expected new rate and see if you would really benefit from a refinance.
Experience With SoFi Student Loan Refinance
I sat down with my boyfriend and asked him some questions about his experience refinancing and consolidating his student loans with SoFi.
Question: Why did you decide to refinance your student loans?
Answer: The main reason was to reduce my interest rates and consolidate multiple smaller loans. I didn’t know too much about the loans and rates when I took out the loans during college, but once I had graduated I realized there were a lot more options that could save me some money.
Question: Why did you decide to refinance with SoFi?
Answer: At the time I refinanced, they had the most options available for my situation. There were other companies that wouldn’t even qualify me for a refinance. SoFi not only enabled me to refinance but also gave pretty good options for terms and rates.
Question: How easy was the refinance process?
Answer: On a scale of 1-10, I would say easy. It was really nice because they would give you projections, based on some basic information, before you officially submitted your application and they told you exactly what paperwork you needed to send in. An actual person would call you if there were any paperwork questions or issues. The entire process took less than two weeks and it was all done online.
Question: Have you seen a benefit from refinancing your loans?
Answer: Definitely a lower rate saves money on interest. It also helped me out when I was buying my first house because my monthly payments were reduced, which helped during the mortgage approval process. I also only have to worry about one larger loan instead of keeping track of multiple smaller balances.
It also has been much nicer to work with a private company servicing my loans instead of the government. I have had a better customer service experience getting the information I need or when I have account issues with SoFi than I ever had with my FedLoan accounts.
Question: Do you recommend refinancing with SoFi?
Answer: For sure. The process of was very straight forward and SoFi was really enjoyable to work with. I had looked into other companies before working with them and all of them said they wouldn’t be able to help me. They seem to be more willing to help people in a broader range of situations than other companies. I have actually ended up refinancing with SoFi twice.
If you are interested in refinancing your student loans with SoFi, we have a great code for you! If you use this link – sofi.com/share/187316 – to refinance your student loans, you’ll get $100 when your new loan is funded!
Refinance Your Student Loans With SoFi
Refinancing through SoFi is pretty easy. The entire process can be done online, even submitting and signing documents. Here are the steps outlined by SoFi on the student loan refinance process:
- Get prequalified online – you can complete the entire refinancing application online, and even find out what you qualify for even before completely submitting the application.
- Select your rate and term – decide what your goal is with your new loan. Do you want to save money on your monthly payment, or save on interest over the life of the loan?
- Get your new loan – upload and submit your documentation and sign your paperwork online. Once everything is submitted and approved, your exiting loan servicer will be paid off. You’ll just pay your new loan!
Refinance your student loans with SoFi using our code and get $100 when your new loan is funded! >> sofi.com/share/187316
Check out these other great articles:
- How an Erin Condren Planner Changed My Finances
- The Basics of Federal Financial Aid
- How to be More Content With What You Have