3 Big Student Loan Myths Demystified

When was the last time you took a second look at your student loans? If you’re like most borrowers, you probably try hard not to think about them. After all, dwelling on your debt isn’t going to make it go away any faster. Or is it?

SoFi_Money_Magnifying_Glass When was the last time you took a second look at your student loans? If you’re like most borrowers, you probably try hard not to think about them. After all, dwelling on your debt isn’t going to make it go away any faster. Or is it?

If you spend that time looking into refinancing those loans at a lower interest rate, then a second look actually could make your loans go away faster – and save you a significant amount of money on interest in the process.

You wouldn’t own a home without revisiting your refinance options periodically, so why would you treat your student loans any differently? Perhaps one of these common student loan myths is holding you back – so here’s the real scoop.

Myth #1: Federal student loans can’t be refinanced
Student loan refinancing was in the news a lot last year, with multiple legislators proposing bills that would allow borrowers to refinance federal student loans with the government (none of the bills passed). In some cases, the coverage gave the impression that federal student loans can’t currently be refinanced without some kind of legislative action, but the truth is that these loans can be refinanced today with a lender like SoFi, the largest provider of student loan refinancing.

Myth #2: Federal student loans shouldn’t be refinanced
Federal loans carry certain features that don’t transfer to private lenders through the refinance process, so you should check to see if any of these features are relevant to you before refinancing. The most common examples are student loan forgiveness (for example, through the public service or teacher forgiveness programs) and income-driven repayment plans (for example, Pay As You Earn).

If you think you’ll benefit from these things, you may be willing to pay a “premium” in the form of higher federal loan interest rates. However, if these features don’t apply to you and saving money is your priority, refinancing can be a way to meet your goals.

Myth #3: Refinancing student loans is a difficult process
The idea of “refinancing” may sound like it involves a mountain of paperwork, but these days many lenders are making it easy with fast, online applications. And with the average SoFi borrower saving $11,783 [1] , it could be the best few minutes you’ve spent on the web in quite a while.

Sponsored

Want to learn more? Check out SoFi to see if a second look could save you money on your student loans.

This article is intended to provide useful information about personal finance, but it is not intended to provide legal, investment or tax advice.


[1] Savings calculation is based on SoFi borrowers who refinanced between 5/21/14 and 7/2/14. Prior to refinancing, these borrowers had on average a $71,000 loan balance, a rate of 7.07% and a lifetime payment of $99,239, assuming the standard Direct Loan term. After refinancing, these borrowers have an average lifetime payment of $87,456 based on a weighted average of new rates received across both types (fixed and variable) and all terms offered by SoFi with AutoPay. Savings calculations assumes borrowers make all payments in a timely manner and do not prepay.

SoFi loans are made by SoFi Lending Corp., NMLS #1121636. California Finance Lender #6054612.

Sponsored