Student loan debt in our country is insane. I managed to dodge it through grants and scholarships, but many of my peers are drowning in it.
It’s gotten so bad that it has eclipsed both credit card debt ($74 billion nationally) and auto loan debt ($1.14 trillion nationally.) The grand total nationally for student loans sits at $1.28 trillion.
That’s insanity. There are ways to bring that number down. Presumably, later this year, the first of the Public Student Loan Forgiveness (PSLF) loans will be forgiven. Some states and cities will pay off your student loans simply for moving in. And certain professions in certain states will garner you some forgiveness, as well.
If you don’t fall into an advantaged program, though, one of the quickest and best ways to lower the amount you owe and end up paying over the course of your loan is to get a lower interest rate.
Don’t believe me? Take a look at this infographic from PenFed featuring real people:
How Marissa Saved On Her Student Loans
My favorite example here is Marissa. By refinancing, she lowered her average interest rate from 7.50% down to 4.29%. That’s a reduction of 3.21%
On top of that, she shortened her loan term. When you pay a loan over longer terms, you almost always end up paying more in interest, simply because you’re paying it for a longer period of time. By shortening your term, you can cut down how much you pay in interest.
That’s what Marissa did. Over the course of her loan, she saved an incredible $144,281 in interest. That’s almost as much as the original refinance amount of $148,000.
Finding the Best Interest Rates
As with any purchase, the best way to find a good interest rate is to shop around. There’s been quite a stir lately as states have started opening or reinstating state refinancing options. Some are good. Some are meh. Some are open to the entire country while some are open only to residents who attended school in their home state.
The lowest fixed interest rate I’ve seen offered through these programs is 3.99% in Kentucky. While they’re open to several states, they’re not open to all—including my home state of PA.
That’s why I was super excited when I saw PenFed’s announcement last month that it is now offering interest rates on student loan refinancing as low as 3.50% fixed. They’re also open nationwide. All you have to do is join PenFed, and applying is super easy to do.
Granted, with either program you have to meet certain eligibility and credit criteria to get the lowest rate. But there is more possibility for saving with PenFed’s interest rate floor.
To find out your rate estimate, you can answer three simple student loan refinancing questions here. It takes less than 30 seconds. Seriously.
A Word of Caution on Refinancing Federal Student Loans
Before refinancing any Federal student loans, research your options. There are several advantaged programs, like income-based repayment, PSLF and REPAYE just to name a few. These and other programs offered by the federal government can save you a ton of money over the course of your loan, and you lose access to them permanently if you refinance with either a state program or a private financial institution.
Have you ever refinanced your student loans? Tell us about your experience in the comments!
*This post is in collaboration with PenFed Credit Union. The views expressed in the article are the views of the author and do not necessarily reflect the views of Pentagon Federal Credit Union.*