If you’re considering refinancing your student loans, you should carefully weigh the pros and cons and consider factors such as whether your debt is federal or private, your personal situation, and your overall financial health both today and beyond the pandemic. Understanding what’s at stake can help you develop a plan that makes sense for you, both now, and when federal relief ends.
Now is a great time to refinance your private student loans: interest rates are at near-historic lows and the Federal Reserve has said that it will keep rates close to zero through 2023. If you took out a private loan years ago when interest rates were higher than today, or your credit score is better now than when you applied for your last loan, this is a great opportunity to improve your financial position by locking in a low fixed rate offer. Variable rates can also be an attractive option in a low-rate environment, but it’s important to keep in mind how a variable rate will affect your payments in the future when rates fluctuate. In addition to securing a lower rate, refinancing your student loans with a private lender like Laurel Road can offer you discounts that could lower your interest rate, such as a 0.25% autopay interest rate discount and an extra 0.25% off your interest rate refi for the first 2 months when you open a Laurel Road Linked SavingsSM account. Depending on how much you save, you could lower your student loan refinancing rate by up to 0.55% after the first two billing cycles.1 Other features include flexible repayment terms, ability to sign with a co-signer (and later release them), economic hardship payment options, and even a $400 cash bonus when you refer a friend.
To illustrate the potential savings, if you owe $120,000 with 10 years left on a 15-year private loan taken out in 2016 at 7%, and you’re able to refinance at a rate of 3.9% into a 10-year loan, your monthly payment would drop from $1,385 to $1,209, saving you $176 each month and a total of $22,500 over the life of the loan. Alternatively, you could shorten the term for this same loan to 7 years and save $32,600 over the life of the loan. These are just two examples of what’s possible – right now, you have the opportunity to craft a loan that suits your needs and could save you money.
If you have federal student loan debt, refinancing to private debt means you will no longer enjoy benefits including, but not limited to, the temporary payment suspension and a 0% interest rate, income-driven repayment plans, Public Service Loan Forgiveness, federal forbearance, or any other benefits that may be offered to federal borrowers now, or in the future. If you’re worried about your finances or your job, the potential impact of losing these benefits should be carefully considered before refinancing. If your finances and job are stable, the appeal of the money you could save might outweigh the advantages of the safety provided by Federal benefits.
When deciding whether or not to refinance, a good rule of thumb is to only consider refinancing your federally held loans if you’re willing to let go of the government protections offered. If you’re currently benefitting from the temporary relief or other federal benefits, it’s probably best to hang on to those loans for now. However, if you have private student loans with rates higher than you currently see advertised, now might be an ideal time for you to refinance. With no hard credit pull required, you can easily check your rate estimate.3 You could qualify for a lower interest rate, a lower monthly payment, or both.
Finally, regardless of whether you currently hold federal or private loans, if you’re looking to chip away at your student loan debt a little bit quicker, the new Laurel Road Student Loan Cashback card can help you do that. With every dollar you spend on everyday purchases, it’s the only card that lets you redeem 2% cashback towards any eligible student loan.2 For more details, click here.
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1. The Laurel Road Linked SavingsSM discount is available to borrowers who open a Laurel Road Linked SavingsSM account at the same time as when they refinance their student loans with Laurel Road. The amount of the discount is based on the borrower’s Laurel Road Linked SavingsSM account balance and may change monthly ranging from 0.15% for balances between $1,000 and $4,999 and 0.55% for balances of $20,000 or greater To be eligible for a discount, borrowers must maintain a minimum Laurel Road Linked SavingsSM account balance of $1000. A borrower’s actual eligibility and rate will be based on their credit profile and other factors. Click here for more information on the Laurel Road Linked SavingsSM Account.
2. You will earn 2.0% in Cashback Rewards for each $1 spent on eligible Purchases if you redeem your Cashback Rewards towards your Student Loan with an eligible servicer. This equates to $0.02 in Cashback Rewards, for each $1spent. For example, if you spend $100, you will earn $2.00 in Student Loan Credit. You will earn 1.0% in Cashback Rewards for each $1 spent on eligible Purchases if redeemed for a statement credit. This equates to $0.01 in Cashback Rewards, for each $1 spent. For example, if you spend $100, you will earn $1.00 in Cashback Rewards. Cashback is awarded based on eligible credit card purchases excluding transactions such as cash advances of any type, balance transfers, convenience check transactions, overdraft protection transfers and quasi-cash transactions. For Terms &Conditions and a full list of eligible loan servicers, visit laurelroad.com/cashbackcard-servicers.
3. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.