Why older Americans with student debt might want to consider refinancing

Student debt is not just a problem for young people; many older Americans also owe money. Refinancing student loans could help seniors lower their monthly payments and get off debt faster. (iStock)

Student loan debt is often seen as a problem facing young people. But the sad reality is that millions of older Americans, including the elderly, are also burdened with educational loans that impact their finances. This can be a particularly important problem during retirement, when income may be limited.

Unfortunately, according to recent research by Institute for Fiscal PolicyAmericans aged 60 and over are actually the fastest growing age segment in the student loan market. In the past decade alone, the number of adults aged 60 and over with student debt has quadrupled. And the amount owed by these seniors has also increased dramatically. In 2012, people aged 60 and over collectively owed about $ 5.2 billion in education loans, but in 2017 that number had risen to $ 9.2 billion.

Paying off so much debt can be a major financial burden. But refinancing student loans could help seniors free up more money in their budget and hopefully get rid of debt faster.

An online tool like Credible can be useful for compare the student loan refinancing rates of several lenders without affecting your credit score.

5 WAYS TO GET THE BEST STUDENT LOAN REFINANCING RATES

What is student loan refinancing?

Student loan refinancing involves paying off existing school debt with a new loan. Student loan refinance loans are only available from private lenders.

You may be eligible for a new loan at a reduced interest rate compared to your existing debt. It could reduce the cost of payment. You may also be able to change your repayment schedule. If you extend your repayment period, you can further reduce monthly payments, but may increase total interest charges over time.

Should I refinance my federal or private student loans?

Before you decide to refinance, ask yourself if you have federal student loans or private student loans.

If you have federal student loans, you may want to delay refinancing since you will end up losing the financial protections offered to you by the CARES law. President Joe Biden signed an executive order extending COVID-19 relief for federal student loan borrowers until the end of September 2021. These protections include temporary forbearance and 0% interest rates.

Plus, federal student loans offer unique benefits to borrowers, including the flexibility to change repayment plans as needed, as well as multiple ways to get some of your student debt canceled. Since you can only refinance with private lenders who don’t offer these benefits, federal loan refinancing is rarely advisable.

Private student loans don’t come with these borrower benefits anyway. There is no downside to refinancing private loans if you can qualify for less than your current debt. Just be aware that if you extend your repayment schedule, it could cause total interest to increase over time, even if you lower your rate, simply because you are paying interest for longer.

If you have private student loans, federal relief does not apply to you. If you want to lower your monthly payments and ease the burden of student debt, consider refinancing your student loans. Lock in some of the lowest interest rates ever seen through the Credible Online Marketplace.

DO YOU NEED A GOOD CREDIT SCORE TO OBTAIN A STUDENT LOAN?

What to do before refinancing student loans

Before you refinance your loans, you will need to shop around to find out what types of student loan refinance offers are available to you. You will want to understand how each loan option would affect both monthly payments and total costs over time. An online student loan refinance calculator can help you see what your new monthly payments might be.

You can also use Credible to compare student loan refinance rates from multiple lenders at once without affecting your credit score.

PRIVATE STUDENT LOAN REPAYMENT OPTIONS

What to do to find the best deal when refinancing student loans

Unlike federal loans which have standardized rates, private student loans can different rates, conditions and conditions of eligibility from one lender to another. Not realizing that this could be a student loan refinancing mistake.

To get the best rate, shop with at least three lenders and get personalized quotes. You can also visit Credible to view a rate table that compares the rates of several lenders at once. Be sure to consider interest charges, fees, and repayment options for choose the best student loan terms for refinancing.

If you are able to get a loan from a competitive rate, consider refinancing to reduce the burden that student debt can represent, especially if you are a senior who is nearing retirement or has left the workforce and has a fixed income.

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Other options

Refinancing isn’t always the right choice, especially if you have federal student loans. But there are other possible solutions to make debt repayment easier.

For example, if you have federal loans, explore income-driven payment plans that cap payments as a percentage of income. These can make the monthly payments affordable and provide loan forgiveness after a certain number of on-time payments.

The important thing is to be proactive about your debt. You probably don’t want to have to pay off your student loans for life. And having high monthly loan bills could impact your ability to retire. Address your debt problem as soon as possible by refinancing or finding a solution that’s right for you.

STUDENT LOAN REFINANCE CALCULATOR: HOW TO CALCULATE YOUR PAYMENTS

About Madeline Powers

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