Why Refinancing Student Loans Benefits Professionals

BIG Ideas:

• Student loan refinancing can lower your interest rate and monthly payments, helping you save money now and over the life of your loan.
• Replacing multiple student loans with one refinance loan simplifies repayment, making it easier to manage your payments and stay on track.
• Before you refinance your student loan, it’s important to evaluate your need for federal loan benefits, your credit score, and your financial goals to ensure it’s the right move for your situation.

The real world is calling.

You know it, that strange place where you’ll swap lecture halls for conference calls, meal plans for career plans, and late-night study sessions for early-morning commutes.

It can be a thrilling and rewarding transition as you put that hard-earned degree to work and start building your career and financial future. But as anyone who’s left the comfort of campus life knows, the real world can be expensive.

From rent and transportation to groceries and entertainment, monthly costs add up quickly and can stretch even the most well-planned budget. If you’ve taken out student loans with high interest rates, the financial burden can feel even heavier.

So, what can you do about it?

For many young professionals, the answer is simple: student loan refinancing.

But what does it mean to refinance your student loan? Keep reading …

Student Loan Refinancing 101

When you refinance your student loans, you replace one or more existing loans with a new single loan, often from a private lender like a bank, credit union, or us, Brazos. You essentially can combine federal and/or private loans into one refinance loan with one new rate, one new term, and one monthly payment.

Make sense? Let’s dive deeper.

How Student Loan Refinancing Could Help You

Now that you know what student loan refinance is, let’s look at the “real-world” benefits.

Refinancing Student Loans could help you:

• Lower your interest rate
  
  The biggest benefit of student loan refinancing is the potential to lower your interest rate. That would allow you to reduce your monthly payment, free up room in your budget, and enjoy significant savings over the life of your loan. Note: Your actual savings will depend on your loan balance, current interest rates, and the rates on your existing loans.

• Simplify your payments
  
  If you have multiple student loans, you must make multiple payments. When you refinance your student loans, you’ll consolidate those loans so that you only have one loan with one lender and one payment, making it easier to keep track of your debt and pay on time.

• Pay off your loan faster
  
  Imagine the real world without the burden of student loan payments. When you refinance, you can choose a shorter repayment term that could help you live out that dream and pay your loans off faster.

• Remove a co-signer
  
  If you needed a parent or guardian to help you qualify for your current loans, student loan refinancing could help you release them from that responsibility, not to mention help you take a major leap toward financial independence. Of course, to get the refinance loan on your own, you’ll have to have a steady income and good credit (more on that later).

• Lock in a fixed rate
  
  If you currently have variable-rate student loans, your payments will rise if interest rates increase. Refinancing to a fixed rate will create predictable monthly payments, making budgeting easier. Plus, you’ll likely sleep better at night if you don’t have to worry about your payments rising if interest rates rise.

Questions to Ask Before You Refinance

If the benefits of refinancing student loans appeal to you, there are several important questions you should consider before proceeding:

• What do I owe – and on what types of loans? Identify which of your loans are federal vs. private, how much you owe, your current interest rates and whether the rates are fixed or variable.

• Do I plan to take advantage of federal loan benefits? Federal loans (loans from the government) offer some benefits that aren’t available on private student loans, like income-driven repayment and loan forgiveness. If you refinance Federal Loans into a private student loan, you will lose those benefits.  So, if you want to take advantage of these federal loan benefits, refinancing won’t work for you.

• Can I qualify for a student loan refinance? Private refinance loans typically require that you have good credit and a steady income. A co-signer could help, but make sure you understand the responsibility involved with getting a co-signer.

• What are my goals? Are you looking to lower your monthly payments? Or pay off your loans faster? Your refinancing decisions should be based on your answer. For example, if your goal is to pay off your loans faster, you’ll want to choose a shorter repayment term. That, however, could raise your monthly payments (depending on interest rates). You could, however, save thousands of dollars over the life of the loan.

Steps to Take Before You Board the Refinance Train

If you’ve answered the questions above and want to move forward with student loan refinancing, here’s what you can do to ensure you’re prepared:

1. Gather up all your loan information. Specifically, you’ll need to know your:

• • Loan balance(s)
  • Interest rate(s) and whether fixed or variable
  • The type of loan(s), federal vs. private
  • The repayment term(s)

You can find federal loan details at studentaid.gov and private loan details by reviewing your loan statements or contacting your lender/servicer.

2. Estimate your savings

You can use our Student Loan Refinance Calculator to see how refinancing could help you reduce your monthly payments and the overall amount you have to pay. You can also see the impact of various repayment terms.

3. Shop private lenders

Rates and terms can vary significantly from private lender to lender. So, compare interest rates, fees, and repayment terms.

4. Check/improve your credit score

Your credit matters a lot when you apply for private loans. It can not only help you qualify for the refinance loan but also help you get a better rate. If you’re not sure of your credit, you can access weekly free reports at AnnualCreditReport.com. Also, many banks and credit card companies offer free score updates. Learn more about ways to boost your credit score.

Brazos is Here to Help You Get Relief From Student Loan Debt

For more than 40 years, Brazos has helped make college costs more affordable for parents and students. As a Texas non-profit lender, we offer competitive rates on refinance student loans that can help you save and free up room in your budget. Contact us to learn more.