Author Topic: When should I apply to refinance student loans.  (Read 2862 times)

BossofMoss

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When should I apply to refinance student loans.
« on: October 31, 2015, 05:26:46 PM »
Hi Everyone.

I've been reading through the MMM blog and forums very regularly over the last couple of months and have learned a lot.  Thank you for all of the valuable contributions.  I'm 24 years old and ready to get my finances in order.

I've got multiple questions/issues, but I'd like to start with a student loan refinancing question.  My financial situation is as follows:

Assets:
Checking Account:  $13K
401K:  $9K

Student Loans:
AES:         $7.9K @ 8.09%
Dis:           $8.6K @ 7.125%
Nav:          $5.3K @ 3.15%
Nav:         $19.7K @ 6.55%

I do not have any other debt.  I am currently working internationally for another 6 weeks and do not have any living expenses.  When I return to the US before Christmas I should have about $20K in cash from income and tuition reimbursement.  I make $65K + likely 5% and have a credit score 790+.  When I return, I will  be making $72-75K w/ 10% bonus.

My issue is I don't know when or who I should apply to refinance with.  I applied about a month ago with Earnest and was denied because I am pursuing a part-time MBA. I explained that I am not financing the MBA and it should it be irrelevant, but had no luck.  I have an account with SoFi, but have not submitted an application yet... After the debacle with Earnest I was a little nervous about how the process works...

With the intent of getting the lowest rate possible, I don't know if I should wait to apply until I build more capital + higher annual income (January application) or if it doesn't matter and I should just start applying now.  Additionally, should I fully pay off the loan at 8.09% before attempting to refinance or lump it into the refi package and aggressively attack?

Any input would be appreciated, including companies that people have had good refi experiences with.  Several people have suggested that I consult with a credit union when I return which I will look into. Thanks.

Sibley

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Re: When should I apply to refinance student loans.
« Reply #1 on: October 31, 2015, 06:33:21 PM »
If you're in school, they probably expect you to defer your loans. Call SoFi or whoever and ask them if they'd even consider you because of the situation, at least that way you don't waste the time with the application if they won't.

However, with your income, you should be able to pay them off in a year or 2, even with the higher rates. Ideally, you'll be able to refi to a lower rate then you can hammer away at them. However it ends up, do a debt snowball, highest to lowest rates.

BossofMoss

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Re: When should I apply to refinance student loans.
« Reply #2 on: November 03, 2015, 07:17:00 AM »
I talked with someone at SoFi and she encouraged to submit the application.  Estimated fixed rate is 5.125% and variable is 3.825%.  The variable isn't capped until 8.95 and w/ money so cheap right now, I think going with the fixed rate is the best move.

What do you guys think, fixed or variable?

AmandaS1989

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Re: When should I apply to refinance student loans.
« Reply #3 on: November 03, 2015, 01:39:56 PM »
I was always taught to go with a fixed rate, but if you're comfortable with the fact that your loans could go up to 8.95% interest then maybe you should think about how long it will take to pay off your loans at the fixed rate and at the variable rate. 1.3% doesn't sound like a huge difference in interest but maybe if you actually run the numbers and compare the fixed rate to the variable rate you might get a better picture of what you'd pay in the long run. And remember, the variable rate changes from month to month, so it could go even lower.

Eric222

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Re: When should I apply to refinance student loans.
« Reply #4 on: November 03, 2015, 03:53:45 PM »
I talked with someone at SoFi and she encouraged to submit the application.  Estimated fixed rate is 5.125% and variable is 3.825%.  The variable isn't capped until 8.95 and w/ money so cheap right now, I think going with the fixed rate is the best move.

What do you guys think, fixed or variable?

I guess my answer would depend on how long you are planning on taking to pay the loans off.  The total looks to be about 40k (I don't math well at night).  If you are going to hammer away on them for the next 2 years and then they'll be gone, I'd go with the variable.  It seems (to me) at least like it isn't going to change much soon.  If you are paying over a longer time horizon (>5 years), then it is about your risk tolerance.

Dee18

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Re: When should I apply to refinance student loans.
« Reply #5 on: November 03, 2015, 06:17:37 PM »
With all that tuition reimbursement pay off the highest interest ones.  Then it's probably not worth refinancing.

OctaviusIII

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Re: When should I apply to refinance student loans.
« Reply #6 on: November 03, 2015, 06:36:33 PM »
Am I reading right that you will soon have about $33k in cash to throw at your debt pile? Why are you holding back from paying off the 8.09% and 7.125% loans with that?

BossofMoss

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Re: When should I apply to refinance student loans.
« Reply #7 on: November 03, 2015, 08:09:28 PM »
@Eric222 - I was looking at 2 to 2.5 years right now.  I know the variable rate swinging at a material level during this period is unlikely, but I'm one of those doomsday thinkers with the market.  Whether its right or wrong, I'm worried how high that rate could go if the market completely crashes in 6-12 months.  Getting stuck at 8.95% in a bad market would be a travesty.

@Dee18 - There are no application or origination fees with SoFi so I'm not sure why it wouldn't be worth it?

@OctaviusIII - I wish...Within the first couple weeks of January I will have about $22K cash total and plan to pay off the $7.9K @ 8.08 right away.  I need to keep some extra cash on hand (about $4G to pay winter tuition) and accommodate for some other rather large upcoming expenses.  I'll be staying at a friends for a month or two until I have a chance to rent a place, with that I will need to buy a bed, dresser, security deposit, etc.  I need to move back to the US and better understand what my expenses will be, but hoping to put about $1500 a month towards paying these off.

Eric222

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Re: When should I apply to refinance student loans.
« Reply #8 on: November 04, 2015, 05:06:56 AM »
@Eric222 - I was looking at 2 to 2.5 years right now.  I know the variable rate swinging at a material level during this period is unlikely, but I'm one of those doomsday thinkers with the market.  Whether its right or wrong, I'm worried how high that rate could go if the market completely crashes in 6-12 months.  Getting stuck at 8.95% in a bad market would be a travesty.

I too am prone to doomsday thinking sometimes.  But, the 8.95% isn't a travesty in a bad market, and in fact, if the market tanked, interest rates would probably go negative (more Quantitive Easing).  One thing to remember is that you are paying more interest at the beginning, so if the rate goes up later it won't affect the total amount you pay nearly as much.

On the other hand, I totally understand the piece of mind of knowing exactly how much you owe and exactly what the interest rate will be.  It's both a math and an emotional equation.

Easye418

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Re: When should I apply to refinance student loans.
« Reply #9 on: November 05, 2015, 07:46:27 AM »
Hi Everyone.

I've been reading through the MMM blog and forums very regularly over the last couple of months and have learned a lot.  Thank you for all of the valuable contributions.  I'm 24 years old and ready to get my finances in order.

I've got multiple questions/issues, but I'd like to start with a student loan refinancing question.  My financial situation is as follows:

Assets:
Checking Account:  $13K
401K:  $9K

Student Loans:
AES:         $7.9K @ 8.09%
Dis:           $8.6K @ 7.125%
Nav:          $5.3K @ 3.15%
Nav:         $19.7K @ 6.55%

I do not have any other debt.  I am currently working internationally for another 6 weeks and do not have any living expenses.  When I return to the US before Christmas I should have about $20K in cash from income and tuition reimbursement.  I make $65K + likely 5% and have a credit score 790+.  When I return, I will  be making $72-75K w/ 10% bonus.

My issue is I don't know when or who I should apply to refinance with.  I applied about a month ago with Earnest and was denied because I am pursuing a part-time MBA. I explained that I am not financing the MBA and it should it be irrelevant, but had no luck.  I have an account with SoFi, but have not submitted an application yet... After the debacle with Earnest I was a little nervous about how the process works...

With the intent of getting the lowest rate possible, I don't know if I should wait to apply until I build more capital + higher annual income (January application) or if it doesn't matter and I should just start applying now.  Additionally, should I fully pay off the loan at 8.09% before attempting to refinance or lump it into the refi package and aggressively attack?

Any input would be appreciated, including companies that people have had good refi experiences with.  Several people have suggested that I consult with a credit union when I return which I will look into. Thanks.

Why the rush to get your MBA right away?  I presume you have been working for 2-3 years?

I think with a credit score of 790, you should get really good rates.  I would get that beast under control now.

BossofMoss

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Re: When should I apply to refinance student loans.
« Reply #10 on: November 05, 2015, 03:58:30 PM »
Update:  Applied last night and was approved today.  Went with the fixed rate at 5.125% after analyzing LIBOR trends over the past 10 years.  My goal is to pay off balance in two years, looking forward to getting back to the States and establishing a budget that will allow me to accomplish.  Have the general figures laid out, just need to finalize.

As far as the MBA - I feel it is an overpriced investment, but the company is throwing $6k per year at it so I figured it is as good of a time as any to start.  I'll probably be out of pocket about $1k this year including books for the 9 credits I took.  You're correct in that I have about 3 years experience.