Avert Disaster: Refinance so Student Loan Debt Doesn’t Ruin Your Retirement

When you hear “student loan debt,” more than likely you don’t think about seniors. But in fact, seniors have student loan debt to the tune of $204 billion, according to CNBC. That’s nearly 17% of the national student loan debt! But just how did they get there?

The short answer is: just like everyone else. Some hold their debt because they co-signed for loved ones – grandchildren, and the like – or because they were continuing their own education. Others have the misconception that student loan debt is forgiven after retirement but in actuality, it is not.

Student Loan Debt and Your Retirement
When it comes to student loan debt and your retirement, you’ll want to pay attention. That’s because the government can tap into your retirement fund as well as your social security benefits to make up for money owed.

Many of those making student loan payments well into older age don’t know that they have options, but they do. Here are two of the easiest ways to keep student loan payments out of the way of your retirement – especially if you feel you may be close to defaulting:

1. Refinance
Just because you have student loan debt doesn’t mean that you’re stuck. Refinancing your student loans allows you to lower your interest rate, and therefore, your monthly payment. It’s also a great way to pay off your student loans faster so you can get them out of the way, and enjoy your retirement debt free.

2. Consolidate
Consolidation is another great option if you are paying student loan payments to several lenders and would like to combine them into one. When you have multiple student loan payments, it can become overwhelming, but consolidation can help to simplify your payback strategy, and also help calm your nerves.

Whatever option you choose – whether it’s a refi or consolidation – you have to know where you stand credit-wise. Having a good credit score can make all of the difference in whether or not you can obtain a lower interest rate. If not, you can always take steps to improve your credit score, and then explore these options later. That way, you get the best rate possible, lower your student loan payments, and enjoy your retirement years.

Laurel Road Student Loan Refinance customers save $20k over the life of their loan on average. Find out what rate you could get by refinancing with Laurel Road here.

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Guest Post – Make Lemonade- 4 Student Loan Refinance Misconceptions

4 Student Loan Refinance Misconceptions

4 common student loan misconceptions now dispelled to help guide your path forward and save you time and money:

  1. “I’m not going to apply to refinance my student loans because I don’t have an 800 credit score.”

You do not need an 800 credit score to be approved for student loan refinancing. Many highly reputable private student loan companies will refinance student loans with credit scores starting in the mid-600’s. Each private student loan company has its own underwriting criteria, which may include credit score, employment status and monthly cash flow, among other criteria. If you do not qualify on your own for student loan refinance, most companies will still refinance your student loans with a qualified co-signer.

A co-signer can be another creditworthy person (e.g., a parent, spouse, relative or friend supportive of your educational goals) to help you qualify for a student loan. A co-signer is equally responsible with you for the student loan obligation. Keep in mind, once you have been approved for a refinanced student loan or new student loan, your co-signer may not want to be financially responsible for your student loan. In this case, some student loan companies will release the co-signer from his or her obligations to repay the student loan.

  1. “I have been working as a public school teacher for 5 years and made all my student loan payments on time. Why haven’t my Sallie Mae student loans been forgiven?”

There are several misconceptions regarding Public Service Loan Forgiveness and Teacher Student Loan Forgiveness.

The key point to remember is that you must have a federal direct student loan, Stafford Loan or consolidated loan that you borrowed from the federal government. There are many examples of student loan borrowers who have believed for years that they made qualifying student loan payments on federal direct student loans only to learn later that their student loans were private student loans. You should confirm in writing with your student loan servicer what types of student loans you borrowed.

A student loan that you borrowed from a private student loan lender such as Sallie Mae is not eligible for student loan forgiveness. Parent PLUS Loans also are not eligible. Importantly, you have to apply for Public Service Loan Forgiveness and Teacher Student Loan Forgiveness (you are not automatically enrolled) and have to meet certain qualifications.

  1. “It will hurt my credit score to check my new rate.”

Not true. With many lenders, you can find out your new interest rate within minutes – with no impact to your credit score through a soft credit pull. Also, if you apply to multiple lenders to find the best student loan interest rate and benefit, your credit score should only be impacted once. According to FICO, student loan “interest rate shopping” inquiries made during a focused time period (for example, 30 days) will have little to no impact on your credit score.

  1. “I don’t want to apply for student loan refinance because I don’t want to refinance all my student loans.”

You do not have to refinance all your student loans – you have the option to pick and choose which student loans that you would like to refinance. For example, if you have high interest rate student loans, you may want to refinance these student loans only and not include your lower interest rate student loans. The goal is to lower your overall student loan payments and save on student loan interest. The good news is that the choice is yours.

This is a guest post written by Zack Friedman, founder and CEO of Make Lemonade, a leading website on student loans and personal finance.

 

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