Data shows the average 2015 graduate heads to work with more than $35,000 in student loan debt to pay back; that’s 70 percent of the average salary of those graduates.

Feeling the pressure, many borrowers do whatever they can to lessen monthly payments or reduce interest and for most, their first thought is student loan refinancing.

Unfortunately, this big news buzzword is not always the best route to financial wellness. Before employees and employers look to student loan refinance companies for help, here are five options debt holders should consider:

1. THE FEDERAL REPAYMENT SWAP

Most borrowers don’t know that changing repayment plans is a free option that could save hundreds each month or cut years off student loan repayment. Repayment plan structures vary based on income, time period, and even loan type.
For borrowers who don’t earn a lot today, but will in the future, a simple repayment plan switch can relieve tons of stress. For others concerned about the long haul, the wrong repayment plan can have serious risks, like extra years of paying interest or missing out on public student loan forgiveness.

THE REFINANCE DANGER
If refinanced, for many loans these helpful repayment options go away and could eliminate future savings down the road or options in tough financial times.

2. CONSOLIDATE YOUR LOANS

Like refinancing, federal student loan consolidation can turn multiple loans into one and offer a fixed interest. Unlike private student loan refinancing, borrowers don’t lose all all repayment plan options because their loans are still held and serviced by the federal government.

THE REFINANCE DANGER
Private student loan refinancing, eliminates this option from a borrower’s battle against student loans. In addition, consolidation can offer the ability to save monthly and maintain eligibility for public student loan forgiveness.

3. CHECK FOR PUBLIC STUDENT LOAN FORGIVENESS ELIGIBILITY

We’re mentioning this three times, because it’s the dream for most borrowers. For many educators and public servants, public student loan forgiveness offers a way out of student loans after meeting the required payment threshold, which is about 10 years for most. After the repayment requirements are met, the program will “forgive” the remaining balance on Direct Loans.

THE REFINANCE DANGER
Private student loan refinance companies don’t offer forgiveness programs and once you’ve moved on to private refinancing, you can’t go back. Consequently, any borrower looking to save with refinancing needs to make sure he and/or she should explore their loan forgiveness eligibility first.

4. PAY HIGH, PAY AHEAD

In cases of multiple loans and interest rates, knowing the interest rates can turn into real savings power. Borrowers who pay down the highest interest rate loans first can save tons of money later on. If you have extra money to pay toward a loan, with most un-refinanced loans you can pay extra toward the highest interest loan.

THE REFINANCE DANGER
Once loans are refinanced or consolidated, borrowers lose the advantage of benefiting from being able to target higher interest rate loans for payoff.

5. AVOID DELINQUENCY AT ALL COSTS

Student Loan delinquency, missing payments by 90 days or more, can result in serious disaster. Delinquency can cause interest, payment amount, and payment time to increase. Avoiding delinquency can be a critical way to save money over time.

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Refinancing your student loans seems appealing at first glance. You, hopefully, get a lower interest rate, multiple loans turn into one, and it’s supposed to be the best move for reducing your student loan payments and paying them off faster, right? Wrong.

Before you decide to refinance, you should know these 3 facts that tell the truth that student loan refinancing isn’t always the best plan and isn’t the only way to get your student loans under control.

1. REFINANCING CAN ELIMINATE/LIMIT FLEXIBILITY AND OPTIONS FOR HELP.

When you refinance a federal student loan loan, the loan is then owned by a private lender. With private lenders many of the benefits and assistance options offered through federal loan providers disappear. These include:

Loan Forgiveness – If you’re in one of the many professions who are eligible for Public Student Loan Forgiveness, the option to have your loans forgiven after 10 years of eligible repayment goes away.
In-School Deferred Payments – If you continue your education, with federal loans you are eligible for deferment or being excused from paying while you’re in school. That option is not available with private lenders.
More Options – Every year the government has the option to create new ways to help borrowers with student loans. Refinancing through a private lender means losing those options.
All of these benefits are lost when you refinance federal loans for private loans, making it a risky move for some borrowers for the long term.

2. INTEREST RATE “SURPRISES”

The appeal of refinancing a federal student loan is often an advertised interest rate or payment reduction. Unfortunately, many borrowers miss important details like loan types, amounts, and the interest rate(s) involved in the deal.

That’s right rates. Federal student loans have a “standard interest rate,” which means they are fixed, or the same, for the life of the loan. Many private student loan interest rates vary, carrying a lower initial rate. The issue with these variable rates is that they can change at any point and could become remarkably larger over time if there’s no cap – even if they may have a lower initial rate than federal fixed rates.

Over time variable rates can affect repayment time, payment, and, indirectly, a borrower’s ability to make other purchases.

3. LOSE THE CHANCE TO USE SALARY TO LOWER PAYMENTS

In addition to those above, federal student loans have an important option for borrowers who experience an income change or drop – Income Based Repayment.

In the event that your income changes, income based repayment can be a great option for ensuring your loan payments don’t overwhelm your budget. This option disappears when you refinance.

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There are more ways to reduce student loan debt than refinancing. At Student Loan Genius, we can help you get student loan benefits. Complete the anonymous form below to help us take the first step in bringing student loan benefits to your company.

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