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Tips for When to Consider Refinancing Your Student Loans

April 09, 2020 · 3 minute read

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Tips for When to Consider Refinancing Your Student Loans

When was the last time you took a close look at your student debt? If you’re like most borrowers, particularly those with six figures of student loan debt from graduate school or MBA programs, you probably shudder at the thought.

Chances are, you set up a student loan repayment plan after graduation and figured you’d revisit it “later”—say, when you’re making more money, when your career is more secure, when you have more time.

This approach is understandable, since after receiving your undergraduate or graduate degree your focus is on other things (like building a career that will help you pay off your loan balance).

But if you let that nebulous “later” date turn into “never,” the repercussions can be costly. At some point, refinancing your student loans could potentially save you a significant amount of money. You just need to figure out if it is the right move for you.

So how do you know when it’s time for a student loan debt check-in? Here are four factors that could prompt a second look:

1. Your current student loans have high interest rates.

The first thing you should look at is the interest rate that you’re paying on your student loans, particularly federal (Direct) Unsubsidized Loans (grad or professional), federal Graduate PLUS Loans and/or private loans.

These loans tend to have higher interest rates than federal subsidized student loans, and you may be able to find a lower interest rate private student loan option.

Depending on how high your loan balance is and how much you can cut that interest rate, your cost savings when refinancing may be significant.

2. Your financial situation has improved since you took out the loans.

Maybe you were a starving student when you first applied for your student loans, but ideally your financial situation has improved with time. This is great news for your bottom line, because a higher credit score and income level (among other factors) are typically key to helping you qualify for a lower interest rate.

And if you expect to stay on an upward financial trajectory, you might even consider refinancing with a variable rate student loan. Variable rate student loans typically offer lower interest rates than fixed rate loans; however, variable rates are tied to market fluctuations, which means rates that are very low today are likely to go up at some point.

The upshot is that these loans could be a solid option for qualified borrowers who intend to pay off their loans at a relatively fast pace.

3. You don’t get any advantages from federal student loan benefits.

Certain types of federal student loans offer perks that should not be overlooked before considering refinancing. Borrowers who are teachers, enter the military, or go to work in the public sector may qualify for federal student loan benefits (such as potential student loan forgiveness) before considering refinancing with a private lender.

Some federal loans also offer relief for borrowers that experience financial hardships (such as loan deferment and graduated/income-driven repayment plans).

If you expect your income to be unpredictable, or you’re looking into qualifying public service employment, it’s usually a safer bet not to refinance federal student loans that are eligible for these benefits. But if you aren’t able to take advantage of any of these federal student loan benefits listed above, refinancing could make sense.

Recommended: Looking for more guidance on your student loans? Explore SoFi’s Student Loan Help Center for tips, resources, guides, and more!

4. You’re about to take out a loan for a mortgage or other large purchase.

For loans like mortgage loans, lenders typically take a look at your credit report to see what type of mortgage a borrower may qualify for.

Buying a new home or taking out another loan for a large purchase could be a good time to refinance your student loans for a lower interest rate, because it could help you get into better financial standing to get a good rate on loans like a mortgage, too.

If you think that student loan refinancing may be a good option for you, the next step is to do a little research by checking out several private loan providers to compare interest rates and other features.

You can also consolidate federal and private loans with SoFi, whereas many lenders do not. On top of that, refinancing your student loans with SoFi is easy.

Simply go to SoFi’s student loan refinancing page to get started. You only need to give a little information about yourself to find out your new rate.

Additionally, SoFi also offers personalized career services and job search assistance, and access to our extensive member network through complementary member experiences like happy hours and dinners.

Which means you could gain more than cost savings when you refinance student loans.

Want to learn more about refinancing your student loans? See your rates in just two minutes.


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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE
FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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