What is the most effective way to pay off my deferred student loans?
I recently graduated from college and I have five different loans through the same private lender with mixed loan types (fixed/variable), high and low rates, and repayment terms totaling $76,000. All payments are deferred up to six months after graduation. I have a cosigner on all loans. I have 10 years of credit history with credit scores above 780. What is the most effective way to refinance to obtain a single repayment option that would enable me to pay down my debt quickly?
I would consider checking out Sofi, a specialized student loan refinancing service. With that high of a credit score you should be able to refinance and consolidate the loans into one with a more favorable interest rate (income would also be considered). You should be aware we're in a rising interest rate environment, so a variable loan may not be the best choice.
Lastly, set up automatic recurring payments to ensure you make progress towards paying off the loan.
Ouch! $75k is a big number for a student loan. First, rank your student loan interests and amounts and pay off the loan with the smallest amount and/or lowest interest rate. Hopefully you can pay it off in a one fell swoop. Second, shop for a better private lender, such as SoFi, CommonBond, Discover. CommonBond, particularly, likes to work professionals graduated with an advance degree, or studied in the field of law or medicine. With your good credit score, you may quality for a better refinance rate. Lastly, as soon as you find the job, set aside a certain amount of money (double each month’s minimum payment) to pay off your balance quickly. Just make sure you tell the lender that any extra is towards the principal. Best!
Congratulations on meeting an important milestone and reaching graduation!
It is a shame that this milestone has caused you to take on a tremendous debt load before even embarking on your career. The idea would be to work on a plan to eliminate this debt as quickly as possible, with as little interest as possible.
The first thing I would do is approach your current lender. Due to the fact that they currently hold all five loans they may be interested in consolidating them and working with you to create terms (Interest rate and Payment plan) that would be mutually beneficial. This would most likely be the easiest and fastest method for you, if they are willing to work with you.
The next step, if the current lender would not be willing to work with you, would be to find a lender (and you can simply google for the top providers in this space) willing to give you the most favorable terms and conditions for you.
Best of luck working through this process and paying down the debt as soon as possible so you can begin to build wealth!
Congratulations! College is no small feat. Given your credit score, you may be able to qualify for one of the student loan specialized lenders like SoFi. Check the rate you get from a few lenders, some have both fixed and variable rates as well. Just be sure to consider total costs of lending any lender programs you may qualify for. Some will give you an interest discount for setting up automatic payments. Also, be aware that you may lose your six-month deferment if you refinance some or all of your loans. I hope this has been helpful.
Antowoine Winters, CFP
Next Steps Financial Planning, LLC
I'd look into a company like Sofi. They offer a signup bonus for consolidating/refinancing with them. You should definitely consolidate if you have 5 different loans all at different rates and terms. The variable loans, in particular, are a dangerous option right now with interest rates on the rise. If you have a decent income and good credit history, you should have no problems consolidating on your own without a cosigner. Once you have that, build a debt paydown strategy that will allow you to still work towards your other financial goals. What I mean is, make sure you don't sacrifice contributing to your 401(k) and saving into an emergency fund just to pay down your debt sooner if it's still going to take you, say 10 years to do so. Either way though, consolidating alone will save you money in the long-run.