Refinancing student loans isn’t for everyone, but it could be for you, find out how.
There is about $1.7 trillion in student loan debt in the U.S. —that means 14% of the U.S. adult population is carrying some amount of student loans. The average amount per borrower is $37,584. About 20% of people who have taken out student loans are behind on payments; between 6% and 7% are more than 90 days behind.
Refinancing your student loans is a tool you have to help avoid delinquency and pay off your student loans faster. Here are a few tips and tricks to help you find the best refinancing options and how to work through the process.
Talk to someone
Before you do anything, reach out to a loan officer at your credit union. That conversation could be the start and finish of your refinancing journey.
If your credit union doesn’t have an option to refinance, there are plenty of companies out there that offer the service. But there are a few things you should know first, and this is where the conversation with a loan officer can help.
Not all student loan refinancers disclose their minimum credit score, but from the ones that do, you’ll need a score of 650–700. That’s not a great credit score, but it’s good. If you’re looking to refinance and fall below that threshold, that conversation with your credit union's loan officer will be beneficial.
If you are below that credit score range, talk to someone about what you can do to help get that number up and over the threshold.
A few quick tips to improving your credit score are:
Your credit advisor will be able to help if you have any more questions, but those steps are a good place to start.
Get a job
Finding someone to refinance your loans is going to be difficult, if not impossible, if you don’t have a full-time job with verifiable, recurring income.
The job market is strange right now. There are plenty of jobs out there, though. They might not be the job you want or even anything you needed to go to school for, but reducing your debt is important.
One thing that is important to look at when finding a job and figuring out your budget to refinance is your debt-to-income ratio.
First off, what is debt-to-income ratio? Your debt-to-income ratio is your monthly debt payments divided by your monthly income.
While this isn’t a perfect method, it will help you better gauge how much debt you have, and how much more you can take on, or where you could refinance some of that debt to a lower rate.
Calculating your debt-to-income ratio will also show you what debt you can pay off sooner. A few hundred dollars here and there might mean digging into savings and delaying that vacation to pay it off, but in the long run, you’ll save more money.
Get a cosigner
If you just can’t get all the parts in place to start the process of refinancing your student loans, you may need to get a cosigner. Obviously, this is going to require someone who meets the requirements to refinance in the first place. You’d probably have to ask a parent.
All in all
Right now, there is still a pause on student loans. Hopefully, you took the time to pay off other debts and improve your debt-to-income ratio. Refinancing your student loans will further help improve that ratio. So send that email, text, or phone call and start the process of refinancing your student loans.