Millennial, Gen Z graduates plan to lower student loan payments with refinancing, survey finds

A new survey found that young student loan borrowers are considering their repayment options, such as: Because of this, this can be a smart move. (iStock)

Student loans are a major stumbling block for many Millennial and Generation Z graduates. The sizeable monthly payments can deter borrowers from saving money to meet some of life’s financial milestones, such as buying a home or starting a family.

While student loan borrowers have been able to take advantage of the COVID-19 deferral, the state deferral period will expire in a few months at the end of January 2022. Fortunately, the majority of young borrowers feel ready to resume student loan payments when their indulgence ends, according to a recent survey of 2,000 Millennial and Generation Z borrowers from Laurel Road, a digital banking platform.

In addition, a significant proportion of these young borrowers plan to take advantage of historically low student loan refinancing rates to cut their monthly payments. About a third (32%) of those with private student loans and almost half (44%) with federal student loans plan to refinance, according to the survey.

Read on to learn more about student loan refinancing and how borrowers can use this financial tool to lower their monthly loan payments. If you decide to refinance your student loans, visit Credible to compare the interest rates of multiple home lenders without compromising your creditworthiness.

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What is Student Loan Refinancing?

In refinancing, a borrower takes out a new loan to pay off another loan. The new loan would preferably have a lower interest rate and more favorable repayment terms so that the borrower can save money over the life of the loan. You can refinance student loans, mortgages, and even credit card debt.

Many Generation Z and Millennials borrowers plan to refinance their student loans to lower their monthly payment amount when the federal student loan hiatus comes to an end.

“As many borrowers continue to prepare for the end of the student loan deferral period, the survey shows that they understand the benefits of refinancing student loans.”

– Statement by Alyssa Schaefer, Laurel Road CEO

Schäfer added that it is “a great option for those looking to save over the life of their loan, and create ways to use that extra cash to help achieve savings goals, as well as much-needed fun and self-sufficiency.”

Student loan refinancing can help borrowers lower their monthly payments or even get out of debt faster as they can qualify for a new interest rate.

A recent study by Credible found that student loan borrowers who refinanced to a shorter-term loan saved nearly $ 17,000 and cut their debt by years. Borrowers who refinanced into a longer-term loan saved an average of about $ 250 on their monthly payments – all without increasing the overall interest rate.

Use a student loan refinance calculator to see how much you can save and compare repayment plans with a soft credit pull.

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Remember, by refinancing federal loans into a private loan, you will not be eligible for federal benefits like administrative leniency and even student loan relief programs.

Why is it a Good Idea to Refinance Student Loans Now?

The Federal Reserve kept interest rates low to fuel economic recovery during the coronavirus pandemic, which affected various financial products. The refinancing rates for student loans are no exception.

According to a credible analysis of borrowers with a credit score of 720 or greater, the fixed rate on 10-year student loans averaged 3.42% for the week of August 30th. That’s a decrease from 4.19% a year ago. The floating rates are even lower – the average rate on a 5-year floating rate loan was 2.74% over the same period compared to 3.12% in the same period last year.

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Student loan consolidation lenders are prohibited from charging additional fees so you have nothing to lose when you refinance your personal student loans at a lower interest rate. You can potentially get an interest rate cut by signing up for an auto-pay rebate.

You can see the latest student loan refinance rates from real online private lenders in the table below. Get prequalified for student loan refinance on Credible to see your estimated interest rate without affecting your creditworthiness.

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Do you have a question about finance but don’t know who to contact? Send an email to the credible money expert at moneyexpert@credible.com and your question could be answered by Credible in our Money Expert section.

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