Student Loan Question

[MickeyMouseCD524]

So thankfully I don't have student loans but I'm trying to help someone else with theirs. Their current loans have a really high interest rate about 10%, and the refinancing options don't seem that much better. My question is should they just tackle it as is or take out a personal loan (The one we found was 5%) so then they can pay off the old loan and their working with a lower interest rate. Thoughts?

And before it's brought up we've looked at loan forgiveness options and this particular person isn't eligible.

 

[afan]

I'd look to see if they can find anything better than what you're finding. I know I've gotten offers in the mail that were under 10%. Granted I laugh at them but I consolidated back in 2005 when rates were awesome so it's around 2%. But I'm sure you can find something for under 10%.

Another thing to consider with the student loan, is even though the person isn't eligible for a forgiveness program, student loans let you defer if you go back to school, become unemployed and can't work, they'll work with you on the payment amount so it fits with your income etc. Those are things a personal loan isn't going to do which is why so many people keep a student loan.

Rather than refinancing look up student loan consolidation or some form of consolidate because I think that's more likely to get you what I need. I mostly did mine so I'd have all of my loans in one place and could make one payment because I have two degrees from different schools and therefore had two loans.

 

[tvguy]

Is this a private student loan or a Federal Loan? 10% seems way high for a Federal loan. I agree, shop around and check with a tax expert to see if there are any routes that have a tax advantage.

 

[barkley]

Another thing to consider with the student loan, is even though the person isn't eligible for a forgiveness program, student loans let you defer if you go back to school, become unemployed and can't work, they'll work with you on the payment amount so it fits with your income etc. Those are things a personal loan isn't going to do which is why so many people keep a student loan.

they also have protections in the case of disability which a traditional loan does not.

i also agree that some investigation into the type of loan they currently have is a good idea-my dd has student loans that were issued between 2013 and 2018-none have interest rates over 5% (and she also gets a quarter percent discount on them by doing auto pay).

 

[seashoreCM]

I would not go with a consolidation loan if there are fees or points or other costs that are lumped into the loan so the starting balance is higher than the sum of the little loans that are being consolidated.

Also the interest rate (and APR) needs to be lower for it to make sense.

 

[runwad]

I just listened to a Clark Howard podcast today and he told his caller to look into Sofi for a refi https://www.sofi.com/refinance-student-loan/

 

[Bryce Sadler]

For studies in programs students can take long-term loans here maybeloan.com simply filling in the application.

 

[MrsPete]

Things to consider:

- You say the individual in question could slice his interest rate in half -- that's hard to beat. The total paid will be significantly less. Have you run an amortization schedule to see exactly how much less?
- How much does the person owe? If we're talking about a fairly small amount it might make sense to hold onto traditional student loans for the (few) protections mentioned above by other posters -- and if the amount is small, the interest saved won't be all that much less. On the other hand, if you're talking about a big-big number, that lower interest rate would really make a lot of difference long-term.
- The person in question is employed? Is this employment stable? If he were to lose this job, would it be easy to find another job? What I'm getting at: Does the person in question need the protection that comes with being able to ask for deferment via student loans?
- Does the person about whom we're speaking have good credit? Meaning, if he refinanced and then found himself in financial trouble, could he fairly easily refinance that loan?

 

[tasha99]

I just listened to a Clark Howard podcast today and he told his caller to look into Sofi for a refi https://www.sofi.com/refinance-student-loan/

We refinanced with Sofi a few months ago at 4.175% and have had no problems so far.