If you decided to go to graduate school, you made a significant investment in your future that can pay off for years after you graduate. According to Peterson’s, a person with a master’s degree earns $40,000 more a year than someone who didn’t pursue further education after getting a bachelor’s degree. Over the course of your career, that can mean you’ll make millions more.
The cost of obtaining your degree could leave you with student loan debt. Just like with undergrad debt, though, one of the best ways to manage it is to refinance your loans.
Below, find out what you need to know about refinancing graduate school loans.
Student loan refinancing is a method you can use to make your debt more manageable and to save money. Through this process, you work with a private lender to take out a new loan for the amount of your current student loans. The private lender pays off your old loans, and you make a single monthly payment to the lender.
The new loan has totally different terms than your previous ones. You’ll have a new minimum payment, monthly due date, repayment term, and even a new interest rate. Plus, you’ll have just one loan instead of several, and one easy monthly payment to remember.
Depending on your income, credit, and debt, you could qualify for a lower interest rate, helping you save money over the length of your loan. Or, if you want a lower monthly payment, you can also extend your repayment term and reduce your monthly bill.
Although student loan refinancing can be helpful for all types of student loans, it can be especially helpful if you have graduate school loans. That’s because graduate school loans tend to have much higher interest rates than undergraduate loans.
For example, federal undergraduate loans have an interest rate of just 5.05 percent, a fairly low rate for education debt. But federal PLUS Loans, which are designed for graduate and professional degree students, have an interest rate of 7.6 percent. For private loans, rates can vary depending on the lender and their individual criteria.
That big difference can add thousands in interest to your loan balance over time. For example, let’s say you graduated with your master’s degree with $50,000 in student loan debt. You have a 7.6 percent interest rate, and a 10-year repayment term.
Over the course of your loan, you’d repay a total of $71,534. Thanks to the high interest rate, you’d repay over $21,000 in interest fees.
If you have graduate school loans, refinancing can help you save a lot of money. How much you can save is dependent on your current debt, interest rate, and what rate you can qualify for on the new loan. But in some cases, the savings can be significant.
For example, let’s say you refinanced your $50,000 in student loans. Instead of 7.6 percent interest, you qualify for a new rate of a just 4 percent and have a repayment term of 10 years.
Thanks to refinancing, your monthly payment would drop, and as a result, you’d save thousands. Over the course of 10 years, you’d repay just $60,747. Taking just a few minutes to refinance your loans would help you save over $10,000.
With those kinds of savings, you can free up more money in your budget each month, which you can use to save for other goals, like retirement or travel.
Find out how much you can save by using the CommonBond refinancing calculator.
Refinancing your graduate school loans can be incredibly helpful. However, there are some downsides to refinancing that you should be aware of before submitting your application, particularly if you have federal student loans.
When you refinance your federal loans, you switch to a private lender. That means you’ll lose out on the protections and benefits that come with federal loans, such as access to income-driven repayment plans and the ability to qualify for Public Service Loan Forgiveness.
You may decide that the tradeoff is worth it; many people never use any of these benefits, and find the savings of refinancing to be preferable over holding onto federal loans. But, it’s a very personal decision and something you should consider carefully before proceeding.
When it comes to graduate school student loans, your debt could be intimidating. Refinancing can be a useful tool you can use to streamline your debt and save money over time, and it’s quick and easy to submit your application. You can find out how much you can save in just a few minutes.