When we contemplate a sustainable and independent lifestyle for our family, one of the most effective things we can do is to get out from under our burden of student loan debt. We finished our two masters degrees, his in teaching and mine in business, with a combined debt load of about $150k. This was broken up into several loans with interest rates varying from 2.5% to 7.5%. In total, we were paying around $1500/month. Unfortunately, a good (bad) portion of that $1500 was interest, money down the drain.
We’re not opposed to student loans in theory. Cleaning out your bank account to pay for college gives you no financial margin of error in the event of a personal emergency (medical bills, car repair, housing costs, etc). If you have the means to pay for college, it is still probably a better idea to take out the loans in the beginning, then repay them quickly on the other end, if you still have the means. If you don’t have the means to pay for college up front, then loans are still your most accessible tool.
In an effort to avoid loans and defray the costs of school, many students choose to take classes part time and work full/part time while in college. This also doesn’t make sense from a financial perspective. If it takes you an extra year or two to graduate because you are only taking classes part time, you have lost a year or two of the higher post-college income. You’ve traded it for a year of the lower wage. Not a good trade.
No, student loans are a good and useful tool. But having accrued them, what now? It becomes a game of reducing their impact on us. We do this through lowering the interest rate.
I’ve refinanced my student loans several times. Unlike when you refinance a mortgage, you don’t pay a fee to refinance student loans. When you refinance, you are taking out a new loan at a new interest rate to pay off the old loan. The available loan rates fluctuate based on the market. They also vary a lot by loan company and from person to person depending on credit rating. I regularly shop around for the student loan company offering the lowest rate. I refinance through them and lock that lower rate in. I’ve worked with CommonBond, SoFi, and Darien Rowayton. I’ve even gone back to my lender when offered a lower rate elsewhere and convinced them to go lower.
Currently, I’m being offered better rates through CommonBond, a relatively new company founded by three students who graduated with too much student loan debt. They wanted to create a way to make paying off student loans easier. I’ve found both their interest rates and their customer service to be good. They’re application process was straight forward, they offered lower interest rates then their competitors, and their online loan portal worked well.
You can begin the refinance conversation with CommonBond here, but I should be up front that CommonBond will send me a $200 referral bonus (Hence the title of this post). My recommendation is based on my experience of their rates and service, not on their referral program, but I don’t want anybody feeling misled.