The day you’ve been waiting for arrives. You walk across the stage, chin up, gleaming with pride, knowing full well that your hard work and sleepless nights have paid off. Someone hands you your diploma, you pause for three-seconds to smile, wave to your family, and then exit the stage feeling like a rockstar.
Not too soon after your celebration, a paper arrives in the mail, but this time, there is no need for cameras and confetti. That’s right, your guess is correct. Your student loans are alive, summoning you to face them and asking you to put your money where your mouth is.
Somebody wants their cash back, and it is your duty to satisfy that demand.
You’re not alone when I say that college fantasies often turn into post-graduation horrors. The news tells us that the student loan industry is now ringing in at the trillions. That’s just insane! With the average student loan debt rolling around the 30k bracket, these numbers aren’t surprising.
While there’s no spell to get rid of student loan debts in a snap, you can waltz your way out of owed money surprisingly effectively through student loan consolidation and refinancing—and even though it’s a stressful time, now is the best time to do it.
Why student loans are big deals and add up
Consider yourself lucky if one student loan covers all that you’ll need for your college and dental school tuitions. However, that just isn’t the case with the majority of students. With an unkind economy like today, even the wisest budding dentistry students will likely need to take out more than one loan to survive studying the practice.
Worst of all tuition fees are increasing, so it only makes sense why students need to acquire larger sums of money, too. Over the last 20 years or so, inflation in college tuition has surpassed hospital care services, child care and housing. Even, the price of public college tuition has still more than doubled since the turn of the century.
Talk about financial brutality!
While several financial aids do mean that students don’t have to pay full sticker price any longer, not everyone is granted access to scholarships and discounts such as these.
As a result, college kids usually end up with a pile of debt. Worse, people often get multiple loans that all have different loan terms and interest rates. The logic is often this—payments don’t kick in until you graduate which is when you’ll have a huge income anyways, so it’s ok.
Sadly, with other bills that surface out nowhere as adulthood progresses, it can be more difficult keeping up with multiple loans, causing debtors to miss payment dues, accumulating higher and higher interest fees. Are you seeing the pattern?
So why do we want to refinance right now?
The impact of the novel coronavirus is crazy, but the discussion and advent of vaccines should help us move forward with hope. But that also means all the great deals of today have a time limit!
You can take advantage of relief programs and low rates providers are extending at a time like this. So, I encourage everyone to consider refinancing their student loans now. This idea is best embraced by those with high-interest rate federal loans, because with interest rates at an incredible low today, you can bet now is an awesome time to refinance.
But with the pandemic, surely not messing with your loans would be a wiser move right?
Understand that the standard federal rates are still bloody. The going federal rate right now is 6.25% which is a horrible number when you can get rates closer to 2.3% if you refinance privately. There is some government aid right now but someday the government student loans aid will end and you will still be footing that bill.
It might be scary to undertake a refinance right now but here’s some quick math as to why it’s silly not to: If you have a big med school level of debt ($200K) dropping to 2.3% saves you a whopping $372/month or $44,551 over the ten years.
Brilliant right?! I would certainly use an extra $372/month right now!
Plus you can get other perks while you’re at it. Fewer monthly payments (by consolidation), unemployment protection (some private lenders hand this out), but best of all cash bonuses.
Most lenders are so motivated to student loans from high income people (like you) that they will pay hundreds of dollars of cash as a signing bonus. If you’re having any sort of Covid based finance issues. A few hundred dollars in your pocket today and a few hundred extra every month can make a big difference.
It takes so little time this is crazy NOT to do
I know you are thinking that you have plenty going on right now. Did you know that it only takes about 15 minutes to apply and get approved for refinancing your student loans? Considering how much easier this will make your life, it would be a crime to let an opportunity like this pass, especially when it doesn’t even take that much of your time!
For efficiency and maximum savings, I recommend online lenders instead of brick and mortar banks. They save money by not having locations and translate that into savings for you.
I can go on and on about the benefits of not using banks, but one of my favorites is that applications take about one minute only and pre-approvals are confirmed in like ten minutes! Heck, ordering at a McDonald’s drive-through could take longer! They often have no closing fees, and offer up cash bonuses instead. Financial beauty if I’ve ever seen some.
Let’s say it takes 15 minutes for the approval but 4 hours to do all the paperwork and finish it off. You’re still making thousands of dollars per hour when you work out how much you’re saving in the long run!
Why refinancing is especially a good idea now
The availability of cash on hand is much more useful today than is normal. I mean, we’re experiencing a global pandemic, aren’t we?! People are doing crazy things for money and you’d be special to not need easy access to money right now!
From a high level getting your loans refinanced now is a big deal for the reasons above. But you only have until the government decides the economy is in good shape before all the incentives like low rates start to disappear.
Will that be next month or once all the vaccines are doled out? No one knows. So I think that means you should just get moving right now to lock in the super awesome rates on display these days.
If you drag your feet and end up paying an extra 1% over 10 years, that’s $11,000 down the drain (for a $200K, 10 year loan). I think that should be plenty of motivation to take this on to start off your new year.
You’ll feel good about yourself and maybe even free up some mental space to work on other personal projects on the side.
Now’s the time
There are far too many reasons for you to refinance your student loans than for you not to—lowered rates and tens of thousands of savings alone should be a good enough determiner. Clean up your credit and find the loan that works for you. If you must, have someone co-sign. The sooner you’re on top of your finances, the easier it will be for you to take control of your future to own the business you’ve always dreamed of!
Author/ Guest Post done by: Leif Kristjansen from FiveYearFIREscape