Yes, I decided to refinance my student loans. Wait! Put down your pitchforks and hear me out!
- Have I lost my mind? Maybe…
- What was I thinking?! Well… It seemed like a good idea at the time…
A Second Look at Student Loan Refinancing
You guys are great! I appreciate your supportive comments and suggestions. Thanks to blonderbetterfasterstronger and reader Angie, for reminding me that refinancing may be an option for me after all. I’d read a number of complaints and stories online about applicants getting rejected left and right by these newer loan start-ups. I assumed that because of my high debt to income ratio, I would be unlikely to get the opportunity to refinance my student loan debt any time soon.
I decided to take a second look around to see if I qualified for anything. I requested rates from a few lenders that appear to have the best reputations in the marketplace for student loan refinancing. I was pleasantly surprised that I wasn’t outright rejected by any of them. I took a look at what they had to offer and decided to accept one.
That long list of loans that we’ve all come to know and hate since my last post will be going away soon. That’s right. This list below…
… will be replaced with this…
I’m actually excited that I qualified to lower my interest rate. It’s nowhere close to the lender’s lowest rate, but it’s a fair sight better than the rates I have been paying up until now. I’m not complaining. I’ll take what I can get. Undoubtedly, paying off all that credit card debt first helped me out.
Why Did I Re-finance My Student Loans?
There are a number of risks involved in re-financing federal loans to private. Frankly, it is not the right move for most borrowers. So, why do it? Simply put, for my situation, the risks were outweighed by the potential rewards.
ONE. The new interest rate is significantly lower. The sheer size of my six-figure balance magnifies the benefit to any interest rate reduction. This should help me get more traction on paying more of the principal.
TWO. Paying down one loan is more convenient than paying down 12. There are more chances for something to go wrong when a servicer is managing several loans. It’s less stressful to have one loan, and the fewer number of outstanding loans reportedly helps your credit score. I really don’t care about my credit score as I don’t plan to ever go into debt again, but a good score does help with renting an apartment, employment background checks, and perhaps qualifying for an even lower interest rate on this student loan once I pay down a good bit of the balance.
THREE. I don’t need any of the federal forgiveness programs. No way in hell am I keeping this loan around my neck for 20 years to try to get it forgiven. I don’t have the desire or the skill set to pursue a public service career for any length of time, let alone be forced to stay in it for 10 years, etc.
FOUR. This loan is not immortal. My new lender offers some basic protections that private student loan lenders haven’t traditionally offered in the past. In the event of death or disability, the loan will be discharged, just like with federal loans.
FIVE. The new loan has a pause button and options. If I lose my job or become ill, the lender will pause my payments for three months at a time, up to a total of 12 months. If my financial situation changes for better or worse, I can refinance with my new lender or elsewhere.
SIX. Most importantly, I plan to pay this debt off quickly (in under 5 years). This is my only debt, and I have ‘relatively’ good job security; about as much as you can have these days anyway. I don’t plan on making any big career changes any time soon. What I do plan on is killing this debt with fire!
Should You Refinance Your Student Loans?
I can’t answer that of course, but there are some good sources out there to help you decide. Here is an infographic from Nerdwallet in an article about student loan refinancing. Google is your friend.
You can get more info here about student loans and refinancing options.
So What Now?
Once things are set up, I can start making payments. I’ll keep you updated on how things go. We’ll find out if my decision was crazy great or just crazy…
I can’t wait to see the balance go down on this debt. Every time I get frustrated with something money related, which seems often these days, I resolve that I will kill this student loan.
“Kill it! Kill it with fire!”