For the first time in over three years, federal student loan borrowers are on the hook to begin repaying their loans this month — and some may have to do financial gymnastics to keep up: 29% of borrowers plan to adjust their retirement plan contributions to keep up with their student loan payments, according to a survey from Nationwide Retirement Institute. The same survey showed 59% are considering additional sources of income or side gigs to offset the financial strain and maintain their retirement contributions.
With all that pressure to repay your student loans, you might be considering refinancing — see the latest student loan refinance rates here — especially since it’s hard to escape those seemingly tempting offers. But is it actually the right move for you? Here are some questions to ask yourself, and a guide on how to refinance if it is the right option for you.
Will refinancing save you money? There’s more to consider than the cost — and by no means is refinancing guaranteed to save you money — but let’s first look at what you might pay. For the week of October 2, 2023, rates on 10-year fixed rate loans averaged 7.29% and 5-year variable loans averaged 6.28%, according to data from Credible for borrowers who prequalified on their marketplace. Those are averages, and to get the lowest rates, you’ll need to have impeccable credit, a strong financial profile and maybe even a cosigner to help improve your creditworthiness. Even then, are the rates you’d get on a refi lower than on your existing federal loan? “Borrowers with excellent credit or who have cosigners with excellent credit may qualify for a fixed rate that is competitive with the interest rates for graduate students and parents. Other borrowers may want to wait for a few years until interest rates drop,” says student loan expert Mark Kantrowitz, author of How to Appeal for More College Financial Aid. In other words, refinancing generally makes the most sense cost-wise for graduate students and parents, who may be paying higher federal loan interest rates. See the latest student loan refinance rates here. One thing to note: Broadly speaking, just because you refinance your loan doesn’t necessarily mean your monthly payment will be lower. “You’re likely going to pay the least amount over time, but depending on whethe …