Author Topic: Refinancing Student Loans  (Read 1582 times)

slb59

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Refinancing Student Loans
« on: January 20, 2017, 07:27:22 AM »
I really, really want to refinance my student loans. However, I'm still in school - kind of. I'm in an MBA program that work mostly pays for, and I'm only taking one class a semester (because that's pretty much what work covers and I don't want to pay for it). You have to be taking two classes per semester to be considered part-time and have the loans deferred. When they're deferred, my interest on half the amount is subsidized.

When I applied to refinance - thinking since I'm not even technically part-time, I'd be eligible - I got rejected for still being in school.

Has anyone had any luck refinancing before they graduated? I've got 46k at 6.625% interest with 21 years left, and am sick at how much interest and how little principle I'm paying each month.

yachi

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Re: Refinancing Student Loans
« Reply #1 on: January 20, 2017, 07:41:58 AM »
The amount of principal you're paying is a direct result of the long repayment length.  You could make extra payments - then you would be paying more principal without having to refinance.  Was this a private refinance that would have lowered your interest rate?  We skipped refinancing my wife's graduate loans since they were all Stafford loans.  The interest rate wasn't going to change, so we felt there was more to lose than gain from refinancing them.  The only thing we would have gained would be 8 loans showing up as 2 on our credit report.

slb59

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Re: Refinancing Student Loans while still taking classes
« Reply #2 on: January 20, 2017, 08:21:42 AM »
Yeah, the advantage of refinancing is that it would drop my interest rate from 6.625% to about 4.5-5% and reduce the term from 21 years to 7 or 10. Both of those together would mean way more of the money I put towards the loans would go to principal. I pay $500 each month (required is $374.51), and last month my interest payment was $263. Even with the added contribution, it was still more than 50% interest.

I'm seriously considering going back to part-time so the subsidy on my interest gets triggered. It would be an extra $6k per year in tuition and would save about $1,500 in interest plus get me to where I can graduate and therefore refinance about a year sooner.

I was just really hoping there was some (reputable) company out there somewhere that would let you refinance if you were still in school or were under the part-time enrollment cutoff...

SimpleCycle

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Re: Refinancing Student Loans
« Reply #3 on: January 20, 2017, 09:24:56 AM »
I refinanced my loans, but the income requirements to get the best rates were very high.  I was able to refinance from 6.8% to 4.0%.

The reason you can't refinance while you're in school is the lender has no idea how much total student debt you will incur, which affects the risk profile of the loan they make you.  There aren't any lenders I know of that will refinance while you're in school, even if you meet the income requirements.

Proud Foot

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Re: Refinancing Student Loans while still taking classes
« Reply #4 on: January 20, 2017, 09:45:16 AM »
Yeah, the advantage of refinancing is that it would drop my interest rate from 6.625% to about 4.5-5% and reduce the term from 21 years to 7 or 10. Both of those together would mean way more of the money I put towards the loans would go to principal. I pay $500 each month (required is $374.51), and last month my interest payment was $263. Even with the added contribution, it was still more than 50% interest.

I'm seriously considering going back to part-time so the subsidy on my interest gets triggered. It would be an extra $6k per year in tuition and would save about $1,500 in interest plus get me to where I can graduate and therefore refinance about a year sooner.

If you were to refinance to a 4.5-5% rate what would your monthly payment be? If it was higher than the $500 you are currently paying then I would up my payment to be that amount.  Everything additional would continue to reduce your principal and then you would know you can fit a higher payment into your budget. 

If you were to go to half time how would you pay the additional $6k? I personally would not pay $6k to be able to save $1,500 but if your employer were to cover it then I think it would make sense to do so.

slb59

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Re: Refinancing Student Loans
« Reply #5 on: January 20, 2017, 10:52:52 AM »
Thanks! This has been helpful if not what I hoped to hear.

My company varies the amount they reimburse each semester depending on how they're doing financially at the time (some is tuition benefit, some is money that would otherwise go towards my bonus). It's ranged from $1500 to $5000, and averages $2800. This semester it was only $2000, and it seems like they've trended lower over time.

If I refinanced, the loan amount would be very close to what I pay now.

Just for kicks after reading your responses, I did some math with an amortization calculator, and it looks like being able to graduate/refinance earlier would save me about $2500 in interest over the life of the loan (making payments equal to $525), plus get me about $2500 in interest subsidies (over the 20 months until I'd graduate, not a year like I calculated earlier). That would be $5k savings for $8.4k in cost. Still not worth it.

I'll try throwing more cash at this as I have it, and just continue to be patient. If my company reimburses me more than about $2500 a semester I'll take two classes, but otherwise stick to one.


robartsd

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Re: Refinancing Student Loans
« Reply #6 on: January 20, 2017, 12:11:08 PM »
When I applied to refinance - thinking since I'm not even technically part-time, I'd be eligible - I got rejected for still being in school.
I assume you have no plans to finance any of your MBA work with loans. Did you graduate with a Bachelor's degree? Is there ever a time when you're not in a course for your MBA and not registered for the next course during which you could apply for a refinance as a 4-year graduate who is not enrolled in graduate studies.

My company varies the amount they reimburse each semester depending on how they're doing financially at the time (some is tuition benefit, some is money that would otherwise go towards my bonus). It's ranged from $1500 to $5000, and averages $2800. This semester it was only $2000, and it seems like they've trended lower over time.
How is the tuition benefit calculated? Specifically is this benefit adjusted based on the number of courses you are enrolled in? The money that would otherwise go towards your bonus is really not much different than you paying for the class yourself with your bonus (other than possible tax implications). Do you expect your compensation will change significantly when you obtain your MBA?