OP-ED

Student loan refinancing: Let's clear the air

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Student loan debt can feel like a dark cloud hanging over your plans. So let’s let some daylight in. Today, you have options – and reasons for optimism.

Remember, you’re far from alone: 45 million Americans owe $1.5 trillion in student loan debt right now. That’s more than the total U.S. credit card debt. In Rhode Island, college grads carry an average of $36,250 in student loan debt – the 3rd highest amount in America.

And you can take control – so that debt doesn’t take control of you.

One thing everyone overlooks about student loans.

When interest rates rise, people are often hesitant to refinance their student loans. But don’t forget one key fact: You’re not the same person who took out those loans.

Back then you were a high school student with big dreams but no credit track record. Today, you’re earning a steady income – and lenders might see you as a better risk. So they may be willing to refinance your loans at a better rate, irrespective of rising rates on other types of loans.

You still have big dreams – as well as big loans.

Perhaps you need terms that will lower your monthly payments. Perhaps you want to consolidate several loans into one payment. Getting out of debt is a goal in itself, but your loans stand in the way of many other plans.

Do you want to own a home some day? Your student loan debt may be the one thing that discourages lenders from giving you a favorable mortgage rate. In fact, student loans are keeping many 24- to 32-year-olds from buying a home, according to a Federal Reserve study.

Think about your other goals: Maximizing your 401(k) contribution. Traveling more. Buying a vacation home. And if children are in your future, of course you want to start saving to relieve the college debt they may face.

Whatever your reason, refinancing can help.

Your refinancing decisions depend on the types of loans you have. You can consolidate federal loans into one loan. For private loans, you’ll need to refinance them before you can fold them into one loan.

There also may be other things to consider.

Make sure you don’t lose important protections.

Federal loans have special benefits. For example, people who work in the public service sector, i.e., teachers and government employees, can apply for loan forgiveness. Federal loans also offer income-driven repayment plans, where the amount of your monthly payment rises or falls based on your current income.

If you refinance those loans, you lose those options. That’s why it’s important to get a specialist’s perspective before you make a refinancing commitment.

Take a look at your savings potential. Then talk it over.

How much could you save by refinancing? Try this calculator and see.

Then have a family conversation about it. If your parents were co-signers or took out loans for your education, that’s an important step.

Sometimes that kind of personal insight just isn’t available through an online–only provider; sometimes you just want to sit down with someone in person to talk through things.

Because your debt colors so many other facets of your life, it helps to review your situation with a banker who not only knows student loans, but your whole financial big picture, especially your goals.

The right guidance can help dispel those clouds of debt and help you uncover new solutions as you make plans for a sunnier future.

All loans and lines of credit are subject to credit approval.

Opinions expressed are that of the author and not Webster Bank N.A. Not intended as financial or any other professional advice. Consult a professional adviser with regard to your individual situation.

Greg Jacobi is senior vice president, Unsecured Lending, at Webster Bank. Greg is responsible for leading teams on digital end-to-end personal loans and student loan refinancing projects. He also manages the bank’s portfolio with financial technology, or “fintech,” lending partners.

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