Even though a predicted 8 million Americans could refinance their student loans at lower interest rates, not everyone who could benefit is even aware that the chance exists.
A Smaller amount of people still understands that there’s more than one way to approach student loan refinancing, or that the approach graduates take depends on their goals.
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Recent graduates, for example, may find their monthly payments are a great challenge to meet. Refinancing into a loan with a longer repayment term —let’s say 15 or 20 years, instead of the standard 10 — may help make those monthly payments handier. The tradeoff to that approach can be higher overall repayment costs.
Other mortgagors who are further along in their careers may have seen an earnings lift that allows them to make bigger monthly payments than they could when they graduated. That opens up the door for refinancing into a loan with a shorter repayment term, which gets them a larger interest rate reduction and maximizes their overall savings.
A 3rd strategy engaged by graduates with large loan balances is to refinance into a loan with roughly the same repayment term. That’s an option that can reduce both the monthly payment and the overall amount repaid.
These are some of the insights from an analysis of thousands of student loans refinanced in the last one and half years with multiple lenders through the Credible.com marketplace (disclosure: I’m the founder and CEO of Credible).
This analysis provides an unusual glimpse into strategies engaged by actual borrowers who have refinanced student loan debt, and the results they’ve achieved.