Check out how a new interest rate would affect your bottom line.
This is extra interest you’d be paying over the life of your loan.
New Monthly Payment
This would be the new monthly payment on your loan.
Here’s a quick snapshot
These numbers are key to understanding if refinancing is right for you.
|Original Loan||New Loan||Savings|
|Term in Years||2yr||2yr||—|
Should I refinance my student loans?
This is one of the most common questions that student loan borrowers ask.
Repaying student loans is no easy task. Millions of borrowers are struggling to clear their debt.
At present, according to NerdWallet, student loan debt has risen to an estimated $1.6 trillion.
What’s more, NitroCollege released a report indicating that the average student loan debt amount was just north of $37,000.
Refinancing is another one of these options.
To refinance means to replace existing student loans with a new one that has a lower interest rate.
This repayment strategy has its pros and cons.
But before we get into that, using a student loan refinance calculator is key if you do decide to refinance.
Let’s look at how it works.
Student Loan Refinance Calculator: How It Works
The student loan refinance calculator (also called a loan consolidation calculator) seen above gives you a detailed overview of your refinanced loan.
To use the calculator, you’ll need to input some information about your existing student loan, including:
- Loan Balance
- Interest Rate
- Years Remaining On Loan Repayment
- Your Credit Score
Once you’ve populated the relevant fields, the student loan refinance calculator will prompt you to select an interest rate.
In order to help you choose a rate, a list of reputable lenders will pop up. For each of these lenders, their Annual Percentage Rate (APR) will appear. That includes both each lender’s fixed and variable APR respectively.
Upon choosing a lender, click ‘Check Rates’ to get a sense of the interest rate you have at your disposal.
Then, enter the details on your new refinance loan. Here, you’ll have to input the remaining balance on the loan, the new interest rate, as well as your loan’s new term.
Then, hit ‘Calculate’ and you’ll see the details surrounding your refinanced student loan, including your estimated monthly payments.
Should I Refinance My Student Loans?
A student loan refinance calculator is a useful tool.
But the real question is “Should I refinance my student loans?”
There is no hard and fast rule when it comes to refinancing.
It depends on your financial situation. For some people, doing so would work in their benefit. For others, apart from it not being a wise decision, they might not even be eligible for loan refinancing.
Here, we’ll provide a breakdown of when you should refinance your student loans:
- Your Student Loans Are Private – If your loans are private, you should consider refinancing. This is because you have nothing to lose and everything to gain. By refinancing a private loan, you will be able to rework your debt at a favorable cost by placing its repayment under a different company. Because private loans cannot benefit from federal loan programs like student loan forgiveness, the only way to get a better bargain would be to refinance. This is especially true for teachers or nurses who would otherwise apply for a special student loan forgiveness program.
- Your Student Loans Have High Variable Rates – A report from the Federal Reserve Board members showed that interest rates on loans will rise over the coming years. As a result, if you have a variable interest rate on your student loan, repaying the balance will become more financially demanding. Refinancing your loan will allow you to get a fixed interest rate. That way, you won’t have to worry about fluctuations in the market.
- You Have Good Credit – Some people have tried refinancing their loans but were unsuccessful. This is usually because they have bad credit. If your credit score has improved since the last time you applied, try again. This time, you’ll stand a better chance of having your request approved.
- You Want To Save Money – Refinancing student loans is a strategy used to save money. The key is to refinance at an optimal rate so you can cut back on spending wherever you can. You don’t need to have a flawless credit score to be eligible. As long as you can get a better interest rate than what’s on your existing loan, you’ve made one step in the right direction.
Should I Refinance My Student Loans? (Cont’d)
That said, there are instances in which refinancing student loans aren’t in your best interest.
This will apply to persons who:
- Are Expecting A Drop-In Income – If you have federal loans and are expecting a loss in income, don’t refinance your loans. This may happen if you will be changing careers or have a fast-approaching termination date on your work contract.
- Are Applying For Student Loan Forgiveness – If you have applied for student loan forgiveness, you cannot refinance your loans.
- Have Declared Bankruptcy – In theory, you can refinance a student loan even if you’ve declared bankruptcy. It’s just a lot more complicated, not to mention difficult. Most lenders call for you to have a four to ten-year gap between the time of refinancing your loan and requesting bankruptcy.
- Defaulted On Their Loan – If you have a student loan default on your record, lenders will be less inclined to give their stamp of approval on your loan refinance. This is because it calls into question your ability to repay loans.
Alternative to Student Loan Refinancing
Apart from student loan refinancing, another option to eliminate student debt is for employers to make contributions to student loans.
Today, an employer paying student loans is a sought after perk for millennial employees.
An example of a company that provides this service is FutureFuel.io. Let’s take a look at how this benefit can help employees.
FutureFuel – Student Loan Repayment Company
FutureFuel offers solutions on student loan repayment that help employees to pay off student loans fast.
By partnering with companies with employees who are repaying student loans, they’re able to make student debt centric benefits more accessible to them.
These benefits include allowing employers to make payments on an employee’s student loans.
That way, employers can lend a helping hand in their staff’s financial wellbeing.
Working for a company that offers this type of benefit can go a long way in eliminating your student debt for good.
Should I Refinance My Student Loans? The Verdict
In short, refinancing student loans is a ticklish matter.
It depends on your finances.
However, if you do decide to do so, a student loan refinance calculator will be an essential tool.
With it, you can keep track of your payments.
That said, you should also consider other debt fighting solutions.
Programs that offer employer student loan repayment services are one such solution.
Weigh your options and choose wisely.
You can reclaim your financial freedom by making smart decisions.