Student Loan Debt Refinancing Explained

student loan refinancing has become
really popular so let’s go over what exactly it does and if it’s right for
you hey guys it’s Justine with debt-free Millennials the channel to help you crush debt and live a debt-free life that includes your student loan debt so
if you’re new to the channel and you want to live debt-free and become debt
free as quickly as possible stick around and subscribe I actually
got this dad just spit on myself I think I did hey I got this question from Amy
Tran on YouTube and she writes please talk about student debt refinancing I
wish I knew more before taking out student loans but it would be so helpful
if you could talk about it Amy thanks so much for your question I feel like a lot
of graduates get kind of stuck where they’re like I have private loans and I
have federal loans and this interest rate and I don’t know what to do trust
me I was there because I had a loan with Sallie Mae I had a shit ton of federal
loans I had a loan through the university even
so it’s like where do you even begin when it comes to maybe considering
refinancing first things first I want to break down the difference between
student loan refinancing and student loan debt consolidation there is a
difference so if you’ve heard of the term student loan consolidation that
only happens at the federal level so with student loan consolidation you can
consolidate all of your federal loans and let’s say you have multiple I myself
had like 10 federal loans so it would be combining all of those loans into one
consolidated federal loan and then you’d have one interest rate in one payment
instead of multiple loans with multiple interest rates make sense now student
loan refinancing is different in that you can combine federal loans and
private loans lump them together into one new loan the refinancing loan
you would have one interest rate one predictable monthly payment and you’d
have one student loan lender that you are working with that’s the biggest
difference between consolidation and refinancing so just to clarify those
terms okay so you can’t refinance your loans through the federal government
program but you can refinance your loans through a private lender there are a ton
out there I can’t believe how many commercials are out there for student
loan refinancing right now but the big thing that you want to consider if you
think you might be a candidate for student loan refinancing let’s go over
this student loan refinancing could be good if you have good credit it’s good
for those that receive a consistent monthly income those that have federal
and private student loans and a lot of it and those who want one monthly
payment towards one loan instead of multiple now student loan refinancing is
not really a good option for those who want to use the public service loan
forgiveness program I can cover that in another video if you’re not familiar
with it and it’s not good for those who have a poor credit or those who have
unpredictable income or those who have loans with already low interest rates so
the whole reason that you would want to combine and refinance your student loans
is if you have a high interest rate on those student loans and you’re wanting
to lower the amount of interest that you pay we all want to pay less in interest
so that we don’t ever have to pay interest again now what’s interesting
here is I checked the current interest rates for federal student loans and
direct unsubsidized and subsidized loans for undergraduates is currently at four
point five three percent direct unsubsidized loans for graduates is six
point zero eight percent and then the PLUS loans is at seven point zero eight
percent so to give you an idea of how this compares to roughly ten years ago
when I was in college I took out federal
unsubsidized loans and subsidized loans between 2007 and 2011 and then interest
rate for the unsubsidized loans as an undergraduate was 6.8%
and the subsidized loans were at four and a half percent so the direct
unsubsidized loans now has decreased from the time that I was in school to
where it is now it’s dropped a couple percentage points so you could have
student loans that are as high as nine to thirteen percent and maybe you’re
looking to refinance and get that percentage rate down to maybe like a 6%
but here’s the thing let’s take a look at an example suppose you have a hundred
thousand dollars in student loan debt and your current interest rate is 10
percent whoa okay so that means you’re paying ten thousand dollars in interest
on that student loan debt on top of paying back your principal I mean that’s
that’s pretty crazy right so let’s say you check out a refinancing lender who’s
offering to pay you a seven percent interest rate so instead of 10 percent
you’d pay seven percent so that’s three percentage points less than what you’d
be paying so you’d be paying what seven thousand dollars in interest per year so
you’re saving yourself three thousand dollars but here’s the thing three
thousand dollars does not solve a hundred thousand dollar problem you
still have to come up with a debt free plan you still have to make it a point
to pay it off as quickly as possible by putting extra payments towards your debt
yeah if I saw three thousand dollars on the ground heck yeah I’m picking it up
and so you could move the needle like this much by refinancing but know that
refinancing is not the secret to getting out of debt it’s not the end-all to your
debt free journey you still have a lot of headway to go and if you work the
steps of getting out of debt saving and budgeting actually
four steps to my debt free planets in my online course of freedom project and
that is having a money mindset saving for emergencies budgeting every single
month and then picking a method to paying off debt I’ll link to that in my
description below but if you’re working that plan just like I did then you can
pay off your student loan debt without having to refinance I personally did not
refinance I can see how in some situations like the example that I
pointed out that you may consider refinancing and that’s fine and all you
can do that and also you have to take these other steps so that student loan
refinancing in a nutshell it works for some people in other cases
it’s just like roll up your sleeves and get to work and start paying down the
debt otherwise I think there are some situations that you could use
refinancing but remember to work your debt free plan first and you are good
and you give Jay

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9 thoughts on “Student Loan Debt Refinancing Explained

  1. Great break down. This will be very helpful to those trying to manage and payoff their student debt. Once that debt is paid off, invest in real estate 😁👍🏻

  2. This was SOOOO helpful Justine. I never had loans for myself, but we have 13 federal loans and a private loan for the hubs. Not sure if we will do either of these options, but now I am armed with info when were ready to tackle them. Thank you!!

  3. I like what you say at the end. I think a lot of people thinking about refinancing are getting analysis paralysis… thinking about saving 2 or 3 percent in the long run with refinancing instead of just paying a little extra and putting it in their debt snowball. Great video!

  4. Oh my gosh it DEFINITELY helped me out. I used Earnest, and they got my interest rate down from 10.29% to 3.69% currently.

  5. I just stumbled across your channel and so glad I did! My only debit is my student loans. Under the PSLF program I have 44 qualifying payments and 77 more to go (2026 is the predicted year). I've been researching the pro's and con's of refinancing and independently paying the consolidated loan off on my own. I have significant student loan debit (2 degrees and 80k later) and 6 years is a long time to wait for POTENTIAL forgiveness while not making a significant impact on the principal and racking up interest. Given the stipulations around qualifying payments 2026 is a long way to wait until I know for certain I'm out from under the weight of my only debit. Thank you for your time and potential insight!

  6. What do you consider a good credit score? Currently paying off credit cards and hoping to have raise my score to almost 700 credit score

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