Everyone will have a different approach to pay off student debt based on their goals and personal situation. To give you a starting point, here are 5 strategies most borrowers use when refinancing their student loans. Each focuses on a different benefit of refinancing and some unique options. Remember, when you refinance multiple loans we automatically consolidate them into one easy monthly payment.
One of the most popular options focuses on the main goal of refinancing: getting a lower interest rate. This strategy lowers your interest rate but keeps your monthly payment the same, which is the easiest way to save since you are paying off more without affecting your cash flow. By qualifying for a lower rate through refinancing, many are able to pay off the debt faster since more money is going towards the principal.
If you are able to put more money towards your monthly payment, it can save you thousands in interest costs over the lifetime of the loan. You can do this by either making additional payments or paying a higher amount per month than what is listed as the minimum payment. These tactics are considered by many to be excellent methods to pay off student loans faster, particularly because there are no prepayment penalties.
If cash flow is tight, lowering your monthly payment by lengthening the term is the way to go. It’s important to remember that if you choose this strategy, you won’t save as much on interest costs. However, since we never have prepayment penalties, you can pay more towards your loan when you are able without worrying about fees. Switching from a 10-year to a 12-year term can lower your monthly payment enough to bring in extra cash which can be used to pay off higher interest debt sooner. It’s a great strategy if you stay disciplined.
If you and your spouse would like to refinance your loans together, PenFed will determine the interest rate using the higher credit score of the two. This situation is beneficial since you could potentially qualify for a lower interest rate thanks to your spouse’s high credit (or vice versa). It’s also a terrific way to save if one spouse has student loans and limited to no income. Perhaps they chose to start a business or stay home and raise a family. Refinancing together allows them to save money too!
Lots of people have co-signers on their existing loans and are looking to assume full responsibility now that they’ve graduated. If you have a cosigner and qualify without them, you can simply apply on your own to release the cosigner. This option can save you money and remove the other party without all the complex releases many lenders have. Furthermore, If you have a parent PLUS loan, PenFed can help transfer it to your child if they are ready to take responsibility for the loan.
Ready to take a step forward? See what you can save with our Find My Rate tool!