Mar 27, 2023 02:34 PM EDT
How Refinancing Your Student Loans Can Make Your Life a Lot Easier
Many Americans have student loan debt. They take on loans to get additional schooling because they know they will have a more attractive resume with a college degree. They can apply for many jobs where the boss or business owner wouldn't otherwise consider them.
About 43.5 million individuals have student loan debt, and some take years before paying it back. Others feel like they can never pay it back because they have too much debt and they're not making enough money at their jobs. Some people have very high bills, and they can't even pay back the minimum student loan amount that's due every month.
In these instances, you might consider refinancing your student loan debt. That can make your life a lot simpler. We'll discuss why right now.
What Does Refinancing Mean?
If you refinance your debt, that means you take out a new loan. You use the money from the new loan to pay off the original debt.
You might wonder why you would exchange one creditor for another. You should refinance only if you can get more favorable loan circumstances. If you look at some different refinancing options and see that you can't get a better deal, then you should not move forward.
If you can get a longer time to pay off your debt if you refinance, you might do it for that reason. You may also refinance if you can get a loan where you pay less interest.
Ideally, if you refinance, you get both of those things. If you can find an entity that will let you refinance your debt, and you get longer to pay it back and pay a lower interest rate on the money you borrowed, that's perfect. It's a win-win for you.
Different Student Loan Debt Varieties
You should also understand that you can have different student loan varieties. There's one main difference: the lending entity.
You can borrow money and attend college, and the US government might give you that loan. You borrow that money from the federal government in most instances.
President Biden has sought student loan forgiveness lately. If you borrowed money from the federal government, you're probably eagerly anticipating the court's decision regarding this loan forgiveness plan.
You might also borrow money for college from a private entity. Some private entities will happily loan you money for school. Sometimes, you might go this route if you feel you're getting a favorable rate.
Even if the Supreme Court okays the student loan debt cancellation, that won't impact you if you used a private entity when you borrowed money. This decision will help you if you used the federal government as your creditor.
How Does Refinancing Your Student Loans Simplify Your Life?
If you refinance a student loan debt, you can probably get an extension to make your life easier. Maybe you've tried to pay off your debt, but you've struggled.
Perhaps you reside somewhere with very high apartment or house rental costs. If you live in a large city like LA, New York, or Chicago, you may work full-time, but you might put all your money toward rent, utility bills, food, etc.
You may have very little leftover that you can put toward paying back your student loans. That's why so many Americans still have student loan debt, even years after graduating from college. They'd pay it back if they could, but inflation has made everything expensive.
If you refinance, you should get more time. You might get an extension that lasts for several years. During that time, you may get a higher-paying job. You might move and live somewhere cheaper.
In those scenarios, you can more easily pay back the loan. You can breathe easier in the meantime. You won't default on your current loan, which might happen if you decide you won't refinance.
You Also Pay Less Money in Interest
Refinancing also gives you a lower interest rate in most instances. There's no denying that makes your life easier.
If you pay less money in interest for the loan's length, you can have more extra cash you'll put toward other things, like groceries, the gas bill, and so forth. You can even have some leftover for fun things, like streaming services, eating out, attending sporting events, etc.
You should pay back your student loans as fast as possible, but you should also not spend every cent getting out from under your debt. You should have some treats and fun things in your life too, or you'll drive yourself crazy worrying.
You Can Eventually Pay Off the Debt
You must pay off your student loan debts, whether you refinance or not. You can hope President Biden's loan forgiveness plan goes through if you used the federal government as your creditor. You should also do what you can to avoid defaulting.
If you default, the courts will garnish your wages until you can rectify your debt. They might even liquidate your assets. You borrowed that money, and the lender wants it back. Maybe they've been patient, but their patience will not last forever.
You can also check out certain other options if you're hoping that loan forgiveness will make your life easier. You can certainly refinance your loan, but you can also sometimes do humanitarian work that will nullify your debt, at least to some extent.
If you work in the medical field and do humanitarian work, for instance, you can often lower your debt that way. You might work with the Red Cross or Habitat for Humanity and reduce your debt. Since you're helping society, you can shrink the overall amount you must pay back.
One way or another, you must rectify the situation if you have massive student loan debts. You might take many years to pay it back, but hopefully, you will get there eventually. In the meantime, you should at least look into refinancing to see whether that can help you.
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