Refinancing Student Loans – My $6,000 Mistake


Wondering if refinancing your student loans is the right thing to do…or a mistake?

I get it. The weight of student loan debt is outrageous.

Like there’s no end in sight.

But, if you use that hopeless place as motivation to get yourself out of debt as fast as possible, and do whatever it takes to move on from this chapter of your life, it does get better.

And that debt repayment plan might include refinancing…something I wish I had known was an option.


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Life After Paying Off Debt

After feeling like I would honestly never be able to pay off my undergraduate and graduate school loans, I did it. In less than three years. To this day, it’s one of my proudest accomplishments and most gratifying feelings.

That annoying debt is GONE.

I saved $30,000 (in interest charges) by paying off my debt early, which is definitely something to celebrate. (Yay!)

But my strategy for paying off student loans wasn’t perfect. I have one big regret.

The Debt Mistake That Cost Me Thousands Of Dollars

At the time, I didn’t know much about refinancing. I knew my interest rate was higher than I wanted (6.8%), but I didn’t know of any options to get a lower rate.

I was just starting to learn the bare minimum about all that money that was being taken from my paycheck in taxes, that retirement was something you had to save for, and how to buy a house with a mortgage loan.

Local Bank Encounter

But one day, I asked a teller at my local bank about getting a lower interest rate for my student loans (which were over $42,000). The look and chuckle I received was a little embarrassing, as she told me they definitely had no options for me. I had no assets, and they were not willing to give me a personal loan that large with a better interest rate.

To be honest, the bank teller’s response caught me off guard, and I felt foolish for even asking. I never spent another second looking into refinancing. I thought I was just stuck with the nearly 7% interest rate I was paying.

Turn Lemons Into Lemonade – Student Loan Book

Now that I am free from my student loans, I realize a lot of people are in the same struggling boat I was in. So I wrote a book about how I annihilated that debt–and how you can too– (it’s called Pay Your Student Loans Fast).

Did I Make a Huge Mistake?

While researching for the book, a friend of mine with undergraduate and law school debt (wooftah!) told me how he used and recommended SoFi to get a much lower interest rate.

I had never heard of it before. Was there an even smarter way to pay off your student loans fast that I didn’t know about?!

I did some research and seriously wished I had known about options to refinance student loans with companies like SoFi a few years ago.

Refinancing My Student Loans With SoFi Would Have Saved Me Thousands Of Dollars

I did the math, and it would have saved me thousands of dollars!

Now with refinancing, you have to be careful about fine print and fees. For federal loans, you may lose perks like income-based repayment plans and student loan forgiveness eligibility (neither of which I am a big fan of).

And you’ll want to make sure the fees (if there are any) do not cost you more than you’ll be saving with the lower interest rate.

Do Your Own Research

Refinancing is not for everyone, but with a little time investment for researching or talking to a financial advisor, you might just realize like I did that a new loan could save you thousands too.

SoFi reportedly has no fees. You get 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.

Student Loan Repayment Lesson Learned

So, my biggest mistake when it comes to paying off my student loans is not refinancing.

I let the one quick “No” I received from my local bank teller deter me from looking any further. I paid the loans off, but I’m all about working smarter…not harder…and had I used SoFi, I would have saved thousands more.

And saving thousands to me definitely fits in the working smarter, not harder file!

So, How Does Refinancing Work?

Refinancing means you finance your loans, typically with a new loan at a lower interest rate. You wouldn’t want to refinance your loans if it meant getting a higher interest rate. That will cost you more in fees and interest charges. Not smart.

With a lower interest rate, your monthly bills should be lower. If you pay the same amount you were paying before refinancing, more of your payment will go toward principal. Thus, this would lower your balance of amount you owe and allow you to pay off your loan faster.

Student Loan Refinancing Example

Here’s an example with the average student loan debt, which in the U.S. at the time of writing is around $30,000.

Let’s say you borrowed $30,000 for your college education. Your loan is at 6.8% interest, and you’re on the standard repayment plan of 10 years.

Standard Repayment Plan:

If you pay your minimum payments (no more, no less), you will pay about $345 per month for 120 months (10 years). The total amount you’d repay for your education would be $41,774. That number is calculated by $30,000 (loan) + $11,774 (interest) = $41,774 total.

Standard Repayment Plan + $100 Extra Per Month

Most people who want to get out of debt faster know they need to pay more than the minimum in order to pay it off faster. So, let’s say you decide you are going to pay an extra $100 per month toward your student debt, making your monthly payment $445. The numbers shake out like this:

Your loan would be paid off in 86 payments (versus 120). You’d repay your $30,000 (loan) + $7,897 (interest) = $37,897 total.

In other words, if you can scrape up an extra $100 per month to put toward your debt, you could save $3,876 in interest and 2.8 years of making payments. Not bad! That’s working smarter.

But it could get even better.

Standard Repayment Plan + $100 Extra Per Month + Refinancing

If you are already committed to making monthly payments of $445 and you refinance through a company like SoFi to get a reduced interest rate around 3%, you could pay off that original $30,000 loan even faster.

Let me demonstrate:

You borrowed $30,000. Your interest is now 3%. Your standard repayment amount would only be $290 (due to lower interest), but you’re too smart and you tightened your budget enough to pay $445 per month.

With this method, it’d only cost you $30,000 (loan) + $2,897 (interest) = $32,897 total. In other words, by refinancing your student loan and payment a little extra, you would save 3.8 years of payments AND save $8,877! Seriously, almost nine-thousand-dollars!

Now that’s working the smartest!

Work Smarter, Not Harder

So, while I’m still super pumped that I eliminated my student loans fast, and I’m not losing sleep over this missed opportunity, if I had to do it again (yuck, gross thought), I would definitely look into refinancing. Looking at the big picture and how much money I can save is motivating for me, and refinancing for a lower interest rate is definitely one way you could pay less for your college debt.

I have not looked into any other refinancing companies even though I know there are others out there. I recommend SoFi as a starting point for refinancing companies to look into because it’s the only one I personally know someone who has refinanced and had a really good experience with them.

I’m sure there are other good companies out there, so if you’ve had a good experience refinancing your loans for a lower rate with someone else, send me a message and let me know! You know I love to hear about ways to be smarter with money.

Cheers to being smart with money,

-Val Breit

Note: The prepayment calculator I use to figure out these numbers can be found here and if you’re interested in how refinancing could help you pay off your student loans faster, start by checking out SoFi.



Val Breit

Val Breit empowers women to create a life they love with simple money hacks and productivity tips. Once buried in debt, stuck in a stressful 9-to-5 job, she hated that money stood in the way of her dream to be a stay-at-home mom. After getting intentional with how she spent her money and time, Val and her husband paid off $60,000 in debt. Now she is blessed to be a work-from-home mom, earning a full-time income online, doing work she loves.

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