Millennials have a significant amount of student loan debt. According to surveys, in fact, it shows that millennials that are ages 18 to 35 typically have an average debt of $41,286.60. This is much higher than the national average of around $28,000. On top of that, more and more millennials are really uninformed when it comes to their student loans. In fact, a majority of student debtors really have no idea how long it will take them to pay off their student loans.
Why Aren’t Millennials Taking Advantage of Refinancing Options?
It is easy to see that with the majority of millennials having no clue about the details of their student loans, that they would really not be taking advantage of refinancing offers that may be ideal for them. It really boils down to being informed. According to Forbes, 45% of their millennial survey participants were not even sure how much money they were paying towards their student loans each month. On top of that, 37% of them didn’t even know their interest rate, and a smaller percentage (15%) didn’t even know their balance. How can you be on top of paying your loans off if you don’t even know these important details?
Perhaps this could be a reason why the Millennials won’t take advantage of their refinancing options. With that being said, however, the 2016 Student Loan Hero Refinancing Survey indicated that 62.11% of student debtors were at least a little bit familiar with student loan refinancing, while 37.89% were not familiar. So, what could be other possible reasons? The same survey states that 20.09% wanted to be able to keep their income based repayment plans, while 8.35% wanted to take advantage of student loan forgiveness. Only 1.96% said that the reason was because they were not approved for refinancing.
Is Refinancing the Right Thing to Do?
With all the talk of refinancing in the air lately, it leads us to this very important question- is refinancing even the right thing to do? Let’s take a look and see.
There are a variety of benefits that come along with refinancing. First of all, you will often times be able to get a lower interest rate. This is especially true if the market rates are low, like they are now. You are also usually able to get better loan terms, allowing you to pay off the loan faster with less interest paid over time. Some simply do it for the simplicity of one loan and one payment.
On the flip side, there are reasons why people prefer to not refinance as well. For instance, refinancing may limit your options when it comes to taking advantage of student loan forgiveness programs and income based repayment plans that are offered by the federal government. Others may just not have the creditworthiness needed to be able to get approved.
In the 2016 Student Loan Hero Refinancing Survey, they also asked why student debtors would choose to refinance their student loans. Only 12.93% said they were not sure or they didn’t know what refinancing entailed. 33.38% wanted a lower interest rate, while 25.93% wanted to lower their monthly payments. Smaller percentages of survey respondents gave reasons like transferring a Parent PLUS loan from their parent’s name to their name, converting a variable rate to a fixed rate, or releasing their cosigner from their loan.
How to Get Started with Refinancing Your Student Loans
If you have decided that student loan refinancing is the solution for your situation, then you are in the right place! To get started with refinancing your student loans, you will first want to look into some of the top private student loan refinancing lenders. There are many that are reputable and willing to work with you to get the terms that you need. Before you apply, make sure that you check the eligibility requirements for each lender. Some may have minimum loan and maximum loan amounts, minimum credit score requirements and other eligibility criteria that you must meet.
Once you find a lender that meets your needs, you will then want to apply for refinancing. To do this, you will start by gathering all of your information about each of your individual student loans. Once you refinance, these individual loans will be clumped together into one larger loan, with one monthly payment. Don’t just go application happy though, because this can make a dent on your credit report.
While many millennials may be overlooking refinancing as a valuable tool for managing their student loan debt, that doesn’t have to be the case. Make sure that you know your options for keeping your student loan payments affordable and being able to pay off your loans quicker so that you will be able to have financial freedom.