Can we talk about student loans? Most people I know have them, and whether they owe $5,000 or $50,000 or $150,000, they all feel this burden in their daily lives. Most of the time I joke with people that I’ll die of old age before my student loans are paid off. I also get frustrated when I think about all the things I’d be able to do if I didn’t have to make these payments every single month. Things like buying a house, or take a trip to Europe, or invest more for my retirement.
In my years of paying on my student loans, I’ve learned a lot. I’ve learned that you have to just make the payments every month and be done with it – don’t dwell on it or you’ll make yourself crazy wondering how you’ll ever pay it off. I’ve learned that people have very different definitions of what is “a lot” in terms of student loan debt. For example, a friend told me how hard it was to make the payments on her husband’s loans, and his balance is 10% of mine.
I’ve also learned a lot about ways to make the payments a little easier. In some cases, people may be eligible to have their loans forgiven entirely. That sounds great, in theory, until you realize that most people don’t qualify. For example, I work for a non-profit organization, which should qualify me for forgiveness of my student loans after so many years of service, but I work for a 501(c)7, which is the wrong kind of non-profit, so I’m not eligible. Sigh.
Refinancing is something I’ve learned a lot about and have actually done twice now. A few years ago, I refinanced my private student loans. As a result, I was able to lower my monthly payments and drastically reduce my interest rate.
Here are my tips for loan refinancing:
- Shop around for the best rates. There are many websites that will help you do this, including my favorite, Credible (more on them in a minute).
- Take advantage of auto-pay discounts – many lenders will reduce your interest rate by .25% by setting up automatic payments each month. This also prevents you from missing a payment (which could damage your credit score)!
- Pay attention to the length of the loan and choose one that fits your budget. This might mean taking a longer loan that has a lower monthly payment, or choosing a shorter loan but knowing you’ll have to tighten your purse strings for a while to pay it off sooner.
- Take advantage of referral bonuses and get some extra cash money while you’re refinancing.
- Consider adding a cosigner – this may open up even better interest rates for you.