Average student loan debt is over $30,000 per borrower (you can see your specific state’s student loan debt here). With most interest rates being between 4-7%, that can make for quite the large monthly payment. And, with a high monthly payment, it can be tough to pay extra each month toward your student loans in order to pay them off faster.
If you are looking to pay off your student loans fast and get rid of them once and for all, consider a student loan refinance. Here are four reasons to refinance your student loans.
Lower Your Interest Rate
Refinancing your student loans could lower your interest rate to 2.36%.
Let’s assume you have $30,000 in student loans with a 6% interest rate and 20 years remaining on the loans. If you refinance, you could save over $13,000 in interest and lower your monthly payment by almost $60 a month!
Those with high credit scores will receive the best interest rate on their student loan refinance. You can improve your credit score by paying all of your bills on time, keeping your credit card balances low, and asking to have your credit limits raised.
Lower Your Monthly Payment
By lowering your interest rate, you will lower your monthly payment assuming you keep the terms the same. While you’ll save the most money by shortening your term, too (though your payment may increase), it’s understandable if at this time in your life you simply need less money going to student loans.
Consolidate Your Payments
Most people have multiple student loan payments they have to make each month. By refinancing your student loans, you’ll combine all of your student loan debt into one debt with one monthly payment. This not only saves you money, but it also simplifies the bill-paying process.
Pay Off Your Student Loan Debt Faster
This is the absolute best reason to refinance if you do it correctly. Lower your interest rate, shorten your term, put extra money each month towards your loans, and boom! You can pay off your debt significantly faster than if you never refinanced!
My husband had $15,000 worth of student loan debt when we got married. We buckled down and put every extra penny towards his loans and paid them off within two years! That feeling was incredible. If you’re carrying $50,000+ in student loans, I know it can seem daunting. But, every single dollar you put towards your debt helps!!
Let’s assume you DO have $50,000 in student loans at 6% interest and 20 years remaining. With a refinance, you’ll save over $23,000 (!!) over the life of the loan, assuming the term remains at 20 years. If you lower your term to 15 years, you’ll save $30/month on your payment AND pay off your loans five years sooner! And this is all without paying extra on your loans. You can do this!!
Ready to get started? Check out SoFi for rates as low as 2.36%! With SoFi, you’ll also receive a $100 cash bonus if you’re approved!
**Please note, if you are eligible for federal student loan repayment options – such as income-based repayment plans or loan forgiveness programs – you may not want to refinance. Refinancing your loans will make you lose access to these plans. As always, speak with a student loan lender to figure out what’s best for you!