A few months ago, my student loan payments increased. Although I can fortunately afford to pay them, it's not a number I'm happy about. The idea of refinancing them has been on my mind lately. Today, James is going to share his thought about why he ultimately decided to refinance his loans!
I have student loans. I hate having student loan debt. I wish my student loan debt was GONE. Now that you know a little bit about my feelings on student loans, I want you to know that I am here to talk to you about why I am thinking about refinancing my student loans from Sallie Mae. How did I get my student loans in the first place? I desperately wanted a degree and was broke. Anyways, I took out the max amount of federal and private loans that I was offered, which did pay for my college education, but left me in a world of financial debt.
I never knew much about student loans when I took them out and I surely did not know that refinancing was an option until a little bit ago. I looked into refinancing and I learned quite a bit. Below, I’ll expand on what I found out and what benefits it will offer me. Let’s take a look.
I’ll Save Money
I will save money. First and foremost, since most of my student loans are already through a private lender, I do not have the same set of federal student loan benefits that you may have. If you want to refinance your student loans, I suggest you sit and think about it for some time because you will lose those benefits.
Okay, back on topic. If I choose to refinance my student loans with a new private lender, I should save a lot of money. I will receive a better interest rate, which will in turn save me thousands over the course of the loan term. Let’s take a look at a breakdown of what I am looking at.
My current student loan amount is $65,000. Ouch! I know. I have an interest rate of 6.8 percent and a loan term of 10 years. This means that my monthly payment is $748 (my rent amount) and I will pay just over $24,700 in interest alone.
The refinanced loan I am looking at would be my student loan amount of $65,000, but at an interest rate of 3.5 percent and the same 10-year loan term. If I do accept the refinanced loan, my new monthly payment would be $643 ($105 cheaper per month) and I would only pay a little over $12,100 in interest over the course of the loan period.
As you can see, I will save not only on my monthly payment, but also on the amount of interest that I have to shell out over the course of the loan.
My Repayment Terms Are Flexible
Another reason why I may refinance my student loans is because I want the flexibility to change my repayment term. As you can see above, I will save $105 per month if I leave the term the same. I have played with the numbers and it would make financial sense for me to simply shorten the length of my loan and here is why.
First, I will be spending close to what I was originally paying for my monthly payment. In fact, it will only increase about $30 from what I was paying and I will be able to shorten the term by 2 years.
Secondly, shortening the terms will save me over $15,000 in interest payments. I used LendEDU to breakdown my student loan situation and options. Here is what I came up with.
The amount owed on the old loan was $65,000 at 10 years with a 6.8 percent interest rate. This was $748 per month and a total of $24,763 paid in interest.
The amount owed on the new loan is $65,000 at 8 years with a 3.5 percent interest rate. This is a $777 monthly payment with a total interest paid amount of only $9,618.
Final Thoughts on Student Loan Refinancing
I want to refinance my Sallie Mae student loans through a private lender because it makes sense for me to. No matter which option I choose at this point, I will save a substantial amount of money over the course of the loan. I am thinking about the second option. Yes, it would require $30 more per month, but I have it to spare and I would be able to pay my loans down quicker and save over $15,000 in the process.
James Strab graduated is a recent graduate from Salisbury University. As he continues to transition into the “real world” he is looking to start a personal blog along with becoming a freelance writer to help pay down his student loan debt.