This article is sponsored by PenFed Credit Union
Today, hundreds of thousands of people in the U.S. are drowning in student loan debt. National student loan debt now weighs in at a stunning $1.28 trillion, having eclipsed both credit card debt ($74 billion) and auto loan debt ($1.14 trillion). For those who don’t qualify for debt relief programs, the burden can be significant and may be leading many people to put off purchasing a home, building reserves for retirement, or meeting other important financial milestones.
Refinancing to the Rescue
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. A drop of a few percentage points can make a major difference in your bottom line.
Take the example of Marissa, an attorney at a mid-sized law firm. After undergraduate and law school, Marissa had nearly $150,000 in student loans. She was able to refinance and lower the average rate of her loans from 7.5% to 4.29%. That’s a reduction of more than 3% and over the life of her loan, it saved her from paying $144,281 in interest.* She was also able to shorten the term of her loan so she could pay it off faster.
Finding Your Low Rate
So, where to find that lower interest rate that will help you save? Many states have started opening or reinstating state refinancing options. These programs vary in their quality. In addition, some are open to anyone, while some are open only to residents who attended school in their home state.
Many people are surprised to discover they can refinance their student loans with their financial institution. Right now, PenFed Credit Union is offering rates on graduate student loan refinancing as low as 3.50% and undergraduate loan refinancing as low as 4.09%. These fixed interest rates are available to any member nationwide, and applying for membership is easy.
As with any refinancing, there are eligibility and credit criteria you must meet to get the lowest rate. But even if you don’t qualify for the lowest rate, you can still save significantly.
Before You Refinance
A word of caution before you refinance any federal student loan: There are several advantaged programs, like income-based repayment, PSLF and REPAYE to name a few. These and other programs offered by the federal government can save you significant 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. So make sure you’ve explored all your options before you decide to refinance.
PenFed is federally insured by NCUA.
* Based on actual student loan refinance borrower; name and identity has been changed to protect borrower privacy.