Tired of your debt and wondering if refinancing student loans could help?
I get it. The weight of student loan debt is suffocating.
After all, you already put in the hard work of passing all the classes and earning your degree, not to mention the battle of finding a legit job, yet month after month, you’re still paying hundreds of dollars for that education.
And there’s no end in sight.
I’ve been there too. That hopeless place of feeling overwhelmed by debt–it’s not a fun place to be.
Student loan refinancing is one of the easiest ways to knock thousands off your loans, but it isn’t right for everybody. Let’s dig in to find out if refinancing student loans is the right choice for you and why I recommend SoFi for refinancing student loans.
This post may contain affiliate links. For more info, please read my disclosure.
Can Refinancing Student Loans Help
After I got my fancy piece of paper (aka a degree) and a pile of student loan bills, I wanted to get rid of them as fast as possible. I was scared by the interest rate and how much extra I was going to pay for my degree if I let my repayment process drag on for a decade or two. I wondered if consolidating, refinancing, or forgiveness programs were an option. I was desperate for any kind of help.
Do You Qualify For Lower Student Loan Interest Rates
At the time, I didn’t know much about refinancing. Ok, I didn’t know anything about refinancing. But I knew the amount I borrowed was already a done deal, and it was the interest that I could maybe do something about. But I didn’t know of anything about my options to get a lower rate.
The bank was the only place I knew to get loans, so one day I asked a teller if getting a lower interest rate for my student loans was an option. She chuckled and with a smirk, told me they definitely had no options for me. I had just started my first real job, had very little money in the bank, and drove an old car.
To be honest, the bank teller’s response caught me off guard. I felt foolish for even asking. And unfortunately for me and my wallet, I never spent another second looking to see if there were any other options for refinancing student loans out there. I thought I was just stuck with the interest rate I was paying.
Don’t Repeat My Mistake – Check Out Your Refinancing Options For Student Loans
I realize a lot of people are in the same boat I was in. You may be overwhelmed by debt. Your loan balance is barely shrinking even after tons of payments because so much is going to interest fees. And you don’t know what to do.
That hurts me to even think about, so I took everything I learned in my journey to tackle my student loans and wrote a book so I could help other people who are experiencing that same struggle. It’s called Pay Your Student Loans Fast but it’s actually helped people wipe out credit card debt, car loans, and medical debt, as well as those nasty student loans. It’s the easy-to-understand, step-by-step guide I wish I had when I didn’t know what to do with my college debt.
While I was researching to write the book, I met a college friend with law school debt (yikes!) for coffee. We were talking about what a pain life after college was, especially those awful student loans. We talked loan forgiveness and how nice it would be if someone just forgave away our loans. Then he told me he used SoFi to get a massively lower interest rate–from 7% down to 2%!
I had never heard of it before, but I was intrigued.
Was there a smarter way to eliminate student debt that I didn’t know about?!
I went home, did some research, and seriously wished I had known about options to refinance student loans with companies like SoFi a few years ago. I whipped out my repayment calculator and couldn’t believe refinancing with SoFi would have saved me thousands of dollars!
I hope no one else repeats my mistake and lets one rejection stop them from checking out other options. If you have student loans and an interest rate above 2.5%, you should seriously consider refinancing. Plus, if you find out you qualify (it only takes 2 minutes!) and want to refinance with SoFi as my friend did, SIGN UP HERE AND YOU’LL GET $100 BONUS in addition to a lower interest rate.
Do Your Research
Now with refinancing, you have to be careful about fine print and fees. For federal student loans, you may lose options like income-based repayment plans as well as deferment, forbearance, and student loan forgiveness eligibility if you refinance with a private lender. And you’ll want to understand if there are any fees and how that compares to your interest savings.
Refinancing is not for everyone, but with a little time invested researching or talking to a financial advisor, you might just realize like I did that refinancing student loans IS an option for you to save money and pay off your debt faster. Also, it doesn’t have to be an all-or-nothing approach. You can refinance some loans and leave others if you choose.
SoFi has no fees and you have options for the length of repayment plan you want to be on. Plus, their advertised interest rate is less than half the interest rate I paid. So I highly recommend at least checking it out. YOU CAN GET PRE-QUALIFIED ONLINE IN JUST TWO MINUTES WITH SOFI.
How Does Refinancing Student Loans Work?
Refinancing means you finance your existing loan, typically with a new loan at a lower interest rate. With a lower interest rate, your monthly bills should be lower. BUT if you pay the same amount you were paying before refinancing, more of your payment will go toward principal and you’ll be able to knock your loan off a heck of a lot faster.
How fast? Let’s walk through an example next.
Student Loan Refinancing Example
The average U.S. student loan debt for college grads in 2017 was $39,400. So for our example to see how much money refinancing could save you, let’s say you borrowed $40,000 at 6.8% interest on the standard repayment plan of 10 years.
Standard Repayment Plan – Minimum Payment
If you pay exactly your minimum payments, you will pay about $444 per month for 10 years (120 months) to repay your college debt.
The total amount you’d repay would be $53,290.
$40,000 (loan/principal) + $13,293 (interest) = $53,290 total.
Total Savings: $0
Minimum Payment + $100 Extra Per Month
The key strategy for those who really attack their debt fast is to consistently pay more than the minimum payment. So let’s say you decide to pay an extra $100 per month, making your monthly payment $544. Your college debt would be paid off in about 7 years (86 months).
$40,000 (loan) + $9.989 (interest) = $49,988 total.
Total Savings: $3,305
In other words, if you can scrape up an extra $100 per month to put toward your debt each month, either through detailed budgeting or a side job, you could save $3,305 in interest and 2.3 years of payments. Not bad! That’s working smarter and I wouldn’t say no to $3k if someone offered it to me…but it could get even better.
Minimum + $158 Extra Per Month + Refinancing Student Loans
If you are already committed to making monthly payments of $544 and you refinance to get a lower interest rate around 3%, you could attack your $40,000 debt even faster and save a lot more time and money. Here’s how:
Since you refinanced and your interest rate is now only 3%, your new minimum monthly payment is only $386, BUT you tightened your budget and started a side hustle so you can afford to pay $544 each month – which is now $158 extra.
$40,000 (loan) + $4,255 (interest) = $44,256 total.
Total Savings: $9,037
By refinancing student loans and paying a little extra, you eliminate 3 years of payments and save $9,037 compared to only making the minimum payments for 10 years without refinancing.
Refinancing Student Loans vs Extra Payment – Which is Better?
Of course, paying extra and refinancing will allow you to attack your debt the fastest. But what if you can’t afford to pay extra every month? Is refinancing still worth it even if you only make the minimum payment?
$40,000 (loan) + $6,349.16 (interest) = $46,349.16 total
Total Savings: $6,941
So even if you can’t afford to pay extra every month right now, simply refinancing and getting a lower interest rate will still save you thousands of dollars over the life of your loan.
Loan Calculator – How Much Does That Loan Really Cost You
You can use this calculator to reveal how much each loan really costs with interest by entering your:
- total loan amount
- interest rate
- monthly payment OR length of loan (in months)
To see how much money you would save if you added an extra payment, adjust the “Monthly payment” to include your minimum payment + any extra you would pay and leave the Length of loan section blank.
To see how much you would need to pay each month to erase your debt in a certain amount of time (ex. 5 years), adjust the “Length of loan (months)” and leave the Monthly payment section blank.
If you’ve read my book, Pay Your Student Loans Fast, you’ll know that my key strategies were finding ways to lower my monthly expenses so I could regularly find extra money to throw at my debt. Did it work? Yes. My husband and I combined paid off over $60,000 in student loans in just a few years on teacher’s salaries. BUT…
Had I known about refinancing my student loans with SoFi, I could have saved over $6,000 in interest.
So to help anyone else with student loans, I felt compelled to humbly admit to you my biggest mistake. If you check out refinancing and decide it’s not for you, at least you know. But don’t let some snarky bank teller who scoffs at your financial situation deter you from checking out your options. You have options! And you might just find an easier way to repay your student loans and save thousands of dollars in the meantime.
You can check out more of the things I wish I had known before graduating college here.
Work Smarter, Not Harder
To sum it up, repaying student loans sucks. And if I had to go through the dreadful student loan repayment process again, the first thing I would do is check to see if I could get a lower interest rate through SoFi because a lower interest rate is the easiest and most effective way to save money on your student loans.
If you are wondering if refinancing student loans is the right move for you, SoFi is the company I recommend. If you decide to refinance with them, You Can Get $100 BONUS through this link. You can use that $100 gift as your first month’s extra payment, and you’ll be on the right path to annihilating your student loans. I can’t wait to celebrate with you at the finish line.
Have you refinanced your student loans? Let me know in the comments.
Cheers to Common Cents & Kissing Those Student Loans Goodbye,