Just because it seems like all college graduates have student debt these days doesn’t mean you shouldn’t try to reduce your student loan payments as much as possible. Refinancing your student loans, the process of changing your interest rate and term, by switching lenders is the best way to alleviate some of that burden. Right now is a historically good time to refinance, as there are more lenders and lower rates than ever before. If you don’t refinance now, you may very well likely be costing yourself thousands of dollars over the course of your loan and hundreds of dollars per month. I would know – my company, Credible, allows borrowers to explore receive refinancing offers from multiple lenders and the average person who refinances saves over $11,000.
Why is it so important to refinance now? There are three main reasons:
1. Interest Rates Are At An All-Time Low But May Rise Soon.
Interest rates are at an all-time low, meaning lenders are willing to lend money out at very low rates. This has resulted in student loan refinancing rates as low as 1.93% APR. However, the federal government has warned that interest rates will rise this year and this will subsequently lead to a rise in student loan rates.
2. There Are More Lenders and Refinancing Options that Ever Before.
There are now at least 12 lenders refinancing private and federal student loans right now, up from two just four years ago. So, borrowers have more options to refinance to terms that are a good fit for them and their financial goals than ever before. Part of the reason for the explosion of lenders is the opportunity to offer well-priced refinancing options afforded by the low interest rates. Once interest rates change, there is no guarantee that all the lenders and their different student loan refinancing options will continue to be offered.
3. Every Month You Wait Costs You Hundreds in Interest!
Your student loan payments never take a break and each day you don’t refinance is another day that you are potentially paying a much higher interest rate than you should. If you have say $50,000 in student loans and a 7% APR interest rate and you could refinance to a 4% APR, then every month that you don’t refinance would cost you $125 in interest payments.
Student loan refinancing isn’t for everyone. It is most appropriate for graduates with student debt, steady income, who are not likely to be eligible for a student loan forgiveness program. However, if you fall into this category, you should explore your options as soon as possible because that urgency may save you thousands.
Stephen Dash is a member of the DailyWorth Connect program. Read more about the program here.