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.
However, what I’m hearing is that most people are overwhelmed with the amount of information available. This results in continuously stressing about their amount of student loan debt.
This year, 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. 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.
Because some goals are reached faster with the help of others.
Answer these questions before deciding to refinance your student loans with a private lender
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. You can find companies offering to refinance here, but what option is best for you?
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?
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 such as interest rates, monthly payments, and the 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 the 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 are a growing number of private lenders offering student loan refinancing from traditional banks, credit unions, and financial service startups. Many student loan refinancing companies will let you check your rate without impacting your credit score.
What are the loan terms of the new loan?
Once approved, understand the loan terms such as interest rates–variable or fixed interest rate loan–and repayment options, and if there are origination fees or prepayment penalties.
Are there additional benefits offered by the lender?
Learn about other benefits offered such as unemployment protection, cosigner release, deferment periods or interest rate change options.
What is the support like?
Finally, understand the type of support you’ll receive and who will service your loans.
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. And if you’ve done your work and want to see if you prequalify for a student loan refinance, check our financial marketplace.