The numbers alone tell a story. The total US student loan debt of $1.5 trillion is second only to mortgage debt. According to the Federal Reserve, 30 percent of adults borrowed money to pay for higher education expenses. For 44 million borrowers nationwide, the average loan burden was $32,731.
The other half of the story is that overwhelming debt puts many life plans on hold. Dreams of buying a home, getting married, starting a business or having children shouldn’t be held up by debt.
Hidden Edge Might Not Last Long
Perhaps the most amazing part of this story is the amount of money being left on the table. Currently, interest rates are still low enough that up to 8 million borrowers can qualify for lower student loan interest rates. However, there are signs showing that interest rates may rise in the near future.
For people that refinance their student loans today, the average savings is around $18,000. The best strategy is to take advantage of low rates while they last.
Past Methods Were Inefficient
The conventional method of refinancing student loans implied going to each individual lender and filling out an application. The response time was at least a day or two, and longer waits were not uncommon. Plus, most borrowers didn’t get accepted by all lenders. In fact, up to 68 percent of those eligible to refinance are turned down by more than one lender.
Streamlined Modern Methods
Today, web based multi-lender platforms have automated the process making it much more efficient. You simply answer a few questions about yourself online, and in minutes you have various prequalified rates presented to you. It’s important to note that these are real rates, not ranges or teaser rates.
The platform gives you all the information needed to compare lenders at at glance. Plus, once you see a rate you like, the same platform puts you in touch with the lender. It’s a one-stop student loan refinancing solution from the comfort of your own home.
Fixed or Variable Rate?
When you pick a new loan, you might be given the option of a fixed or variable interest rate. Given the uncertain future of interest rates, it’s not easy to know which one to choose. A fixed rate is guaranteed for the life of the loan, but these rates are higher. A variable rate starts lower, but it might go up significantly later.
If you can get a fixed rate lower than your current rate, this might be best choice for those who need stability. If you’re willing to take a bit of a risk, you could choose a variable rate. Variable rates have the best chance of maximizing money in your pocket. Still, if interest rates go up significantly, the variable rate will cut into – or even wipe out – your savings.
Margin of Time
If interest rates rise soon, you might not find any lenders to give you a lower rate. Given the current economic scenario, now is the time to refinance.