Student Loan Refinancing Tips
The nation is abuzz with the news of student loan debt forgiveness recently approved by President Joe Biden. But, what does it mean for you?
At The Gretchen Rehm Financial, we aim to provide you with the best financial advice for your unique, individual needs. Let’s take a look at some of the best tips for refinancing your student loans.
What Is Student Loan Refinancing?
While debt forgiveness seems to spur controversy, it is smart for anyone to take a look at all of their options to put themselves in the best financial situation possible. If you are one of the 43 million Americans still paying down educational debts, including a large number of public school teachers, refinancing might be a great option for you.
Refinancing, in its simplest terms, simply means to pay off debts to your current lender or lenders and taking on a new loan to do so. This will change “who” you are borrowing from, with the overall goal to secure more favorable terms.
How Student Loan Refinancing Works
The first step in refinancing your student loans is to find a lender, such as a bank or credit union. From there, you can apply for your new loan. The terms of this new option will depend heavily on your credit score, your current financial situation, and the amount of debt you have remaining.
It’s possible to find more affordable monthly rates, lower interest rates, and more favorable terms such as shorter pay-off timeframes. However, finding the right lender can be a challenge! Please reach out to my office if you’d like to discuss this.
If you are approved, the process can be as simple as signing a few documents.
Who Is Eligible to Refinance Their Student Loans?
Everyone’s situation is different, but in a broad sense, those with high credit scores (at least 650 or higher) and low debt to income ratio (DTIR) are most eligible for a refinancing option. Monitoring your credit score can be a helpful start to the process, ensuring you get the best rates and terms. Additionally, calculating your DTIR will help you understand where you stand to most lenders.
A DTIR is a simple calculation, which includes adding up your total monthly income, and deducting the monthly bills you are responsible for paying. Most lenders seek to have a number under 50% (meaning half your income is not dedicated to monthly bills). Please reach out to my office if you’d like to discuss this.
What is the Public Service Loan Forgiveness (PSLF) Program?
My office has seen quite a few clients qualify for the PSLF program - which stands for the Public Service Loan Forgiveness program. Find out more about PSLF and who qualifies for the program by visiting the Department of Education website.
PLEASE NOTE: There is currently a limited-time PSLF waiver that is open until October 31, 2022. The federal student loan program is granting time-limited changes to Public Service Loan Forgiveness (PSLF) Program rules that allow borrowers to receive credit for past periods of repayment that would otherwise not qualify for PSLF. Visit this website for more information, or call my office to discuss your options.
Seek Professional Help
The best advice when it comes to managing your student loans, or any other major debts on your mind, is to seek the help of a professional. My team and I have access to multiple resources and have helped many people with their student loans, over the years, especially educators.
From lengthening your payment plan, to changing the rates, there are plenty of variables to weigh when refinancing. To be sure you’re considering all options from all angles, we’re here to talk you through the options!
