In other posts, I’ve talked about getting your finances under control and the student debt issue we have in the U.S. Today, I want to focus exclusively on options and ideas for refinancing your student loans and ultimately, eliminating your student loan debt. In this post, I will discuss why it is important to refinance your student loans, and then I will review how you can refinance your student loans with LendEdu.
Just a quick note, I recently signed up to be an affiliate with LendEdu. I will discuss them in more detail later in the post, but I do get a small commission for anyone that signs up on their website for a quote on a refinance. My main goal is to help you, so if you do not want me to get the commission, just type in www.lendedu.com into your web browser and at least help yourself save money 🙂
There are three types of student loans I am aware of: federal, state and private loans. I had loans from each category.
In general, state and federal loans have the lowest interest rates. Private loans are never a good deal (unless they are from your parents), and they usually have interest rates greater than 10%.
For me, my state loan (the MN SELF loan) had a variable interest rate of 3.8%, which it never exceeded. My federal loans were between 5.4% and 6.8% – almost double! My private loan, which was through Sallie Mae, was 7.2%.
I cannot understand how someone can go out and finance a $70k BMW for 0% interest, which by the way is extremely stupid unless you make enough money to pay for that in cash. BUT, a student looking to further his or her education has to take out loans with these higher interest rates!!
All the more reason for us to keep pushing our government for better loan options for students and more importantly, to make higher education more affordable!!
Sorry for the ramble there, but I get fired up about this.
Why is it important to tackle your student debt and eliminate it quickly? The answer is simple – BECAUSE YOU CAN SAVE YOURSELF HUNDREDS OR EVEN THOUSANDS OF DOLLARS!!
Here is an example using numbers for the current average student debt and starting salary for a college graduate.
If we look at the average student graduating college – they have $37k in debt making $50k a year. How long will it take them to pay off their debts? The table below shows what the monthly payment is and the total interest paid over different payback periods: 5, 10, 15 and 30 years. The table on the left shows a loan with a 3% interest rate and compares that to a loan with a 6.8% interest rate.
It is extremely important to fight for the best interest rate. Then, if you can, pay back the loans as aggressively as you can. Even if you aggressively pay back your loans in five years, you can save yourself almost $4,000 dollars if you can get a better interest rate on your loans.
There are many services out there for refinancing your student loans. What I like about LendEdu is they compare rates from 12 different lenders so you can get the best deal. Ultimately, they are looking for ways to help save you money and interest rates can be as low as $2.13%. The process is simple and you can get started saving money quickly by following these steps on their site:
- Go to the site here and start the form
- Enter your information
- review the options and save $$
If you are reading this post and you haven’t gone to college yet – please thoroughly think through what the total cost is for the colleges you are considering.
Ask yourself: what will the degree I am getting pay me?
The next logical question should be: how long will it take me to pay back the debt I will incur pursuing this degree.
This is a simple return on your investment (ROI) discussion. Here is a link to some personal finance advice that new college students may find use.