I've had many conversations about student loan debt becoming a burden to achieving financial goals and impeding one's ability to chase their dreams. So naturally, many go online seeking answers to the best ways to get rid of student loan debt. What I'm hearing is that most people are overwhelmed with the amount of information available. This results in continuously stressing about the amount of student loan debt.
In March, my friend Robert Farrington, the founder of the top-rated blog, thecollegeinvestor.com, began a Student Loan Debt Movement. His mission is to help people pay off $1 Million in student loan debt. You got it, one million dollars of student loan debt, in one month. I had to spell that out so you understand how this is a big goal. One million is a lot and can change the lives of so many people but keep in mind this is also just a small amount of the over $1.3 Trillion in student loan debt outstanding.
I'm sharing this Movement with you because a big part of any debt-repayment strategy is motivation. Robert created a movement putting people together who have one goal–live student loan debt free. Being part of a movement can help you prioritize your student loan repayment. Plus, you also get a chance to win $500 (yup, he's giving away $500 to help you take a big chunk out of that debt).
Why do you need to join a Movement to pay off student loans? Because some goals are reached faster with the help of others.
To do my part to help eliminate student loan debt, I wanted to focus this article on helping you understand student loan refinancing with private lenders.
There's a lot of advertisements out there about student loan refinancing from private lenders. Companies like SoFi and Lendkey offers private student loan refinancing options. But what option is best for you?
But before you go applying for refinancing I want you to consider these questions to guide you. I, then, recommend you head on over to the Student Loan Debt Movement and join others in eliminated $1 million of student debt.
There are many reasons to refinance your existing student loans which involves repaying your older existing loans to a new loan with different terms. Private loan refinancing can involve consolidating federal loans with private loans. Many borrowers interested in refinancing can choose from a growing number of private lenders.
Answer these questions before you decide to refinance and select a student loan private lender:
Why refinance your student loans? There are many reasons to refinance your student loans and most do so to lower the monthly payments. This can be done by refinancing with a lower interest rate and better loan terms. Or you may simply want to refinance to manage payments from multiple monthly payments to one single payment.
How much do you owe and current monthly payments? You need to know how much your monthly payments are and the total amount owed. This will help you determine if a new single monthly payment is indeed better.
What types of loans and terms do you have? Know whether you have federal or private student loans and the terms associated with those loans such as interest rates, monthly payments, and loan repayment period. With private lenders, you can consolidate both private and federal student loans into a new loan.
What is your employment situation? In order to get approved for a new loan, you will need to have a steady income to repay the loan. If you are unemployed, you’ll find it difficult for a private lender to approve a refinancing loan.
What is your credit score? Your credit score is an important factor for loan approval. Most lenders want strong credit scores and if you happen to have less than perfect credit you may want to improve your credit standing before applying. Additionally, some private lenders may let you have a cosigner with a cosigner release agreement. Cosigner release agreements enable you to release the cosigner after a successful repayment history or improve credit and income increase.
Are you planning to take advantage of federal benefits such as Public Service Loan Forgiveness program? If you work in public service, you may lose your benefits under loan forgiveness. Additionally, consolidating your federal student loan into a private loan will take away some repayment options related to financial hardships and payment deferral programs.
What are your private lender options? There is a growing number of private lenders offering student loan refinancing. From traditional banks, credit unions and financial service startups. Research and make a list to determine which lender is right for you. Many student loan refinancing startups will let you check your rate without impacting your credit score. Keep in mind that some of these lenders are specific on the schools attend or degrees attained before you become eligible for their refinancing product.
What are the loan terms of the new loan? Once approved, completely understand the loan terms such as interest rates, is it a variable or fixed interest rate loan, repayment options, are there origination fees or prepayment penalties.
Are there additional benefits offered by the lender? Find out what other benefits are offered from unemployment protection, deferment periods or interest rate change options.
What is the support like? Finally, understand the type of support you’ll receive and if your loan will get sold to a different servicer.
If you’re eligible for student loan refinancing, you could save hundreds, if not thousands of dollars, over the life of your student loan. Answer the questions above before proceeding to make the best decision.