Student loan debt is often viewed as a problem facing young people. But the sad reality is that millions of older Americans, including senior citizens, are also burdened with educational loans that impact their finances. This can be an especially big problem during retirement when income may be limited.
Unfortunately, according to recent research from Fiscal Policy Institute, Americans aged 60 and up are actually the fastest-growing age segment within the student loan market. In just the past decade, the number of adults 60 and over who have student loan debt has quadrupled. And the amount these seniors owe has also risen dramatically. In 2012, individuals 60 and older collectively owed around $5.2 billion in educational loans but by 2017, that number was up to $9.2 billion.
Repaying so much debt can be a major financial burden. But student loan refinancing could help seniors free up more money in their budgets and hopefully eliminate their debt more quickly.
An online tool like Credible can be handy for comparing student loan refinancing rates from multiple lenders without affecting your credit score.
What is student loan refinancing?
Student loan refinancing involves repaying existing educational debt with a new loan. Student loan refinance loans are only available from private lenders.
You may be able to qualify for a new loan at a reduced interest rate compared with your existing debt. This could lower payment costs. You may also be able to change your repayment timeline. If you make your payoff time longer, you can further reduce monthly payments but may make total interest costs higher over time.
Should I refinance my federal or private student loans?
Before you decide whether to refinance, consider whether you have federal student loans or private student loans.
If you have federal student loans, you may want to hold off on refinancing since you'd wind up losing financial protections that are available to you through the CARES Act. President Joe Biden signed an executive order extending COVID-19 relief for federal student loan borrowers through the end of September 2021. Among those protections are temporary forbearance and 0% interest rates.
Additionally, federal student loans offer unique benefits for borrowers, including flexibility in changing payoff plans as needed, as well as multiple different ways to get part of your student debt forgiven. Since you can only refinance with private lenders who don't offer these benefits, refinancing federal loans is rarely advisable.
Private student loans don't come with these borrower benefits anyway. There's no downside to refinancing private loans if you can qualify at a lower rate than your current debt. Just be mindful that if you extend your payoff timeline, this could lead to higher total interest over time even if you reduce your rate -- simply because you pay interest for longer.
If you have private student loans then federal relief doesn't apply to you. If you're looking to lower monthly payments and ease the burden of student loan debt, then consider refinancing your student loans. Lock in some of the lowest interest rates ever via the online marketplace Credible.
What to do before refinancing student loans
Before refinancing your loans, you'll need to shop around to find out what type of student loan refinancing offers are available to you. You'll want to understand how each loan option would affect both monthly payments and total costs over time. An online student loan refinancing calculator can help you see what your new monthly payments could be.
You can also use Credible to compare student loan refinancing rates from multiple lenders at once without affecting your credit score.
What to do to find the best offer when refinancing student loans
Unlike federal loans that have standardized rates, private student loans can have very different rates, terms and qualifying requirements from one lender to the next. Not realizing this could be a major student loan refinancing mistake.
To get the best rate, shop around with at least three lenders and get personalized quotes. You can also visit Credible to view a rates table that compares rates from multiple lenders at once. Be sure to look at interest costs, fees and payoff options to choose the best student loan terms for refinancing.
If you're able to get a loan at a competitive rate, consider refinancing to reduce the burden student loan debt can present -- especially if you're a senior who is nearing retirement or who has left the workforce and is on a fixed income.
Refinancing isn't always the right choice, particularly if you have federal student loans. But there are other possible solutions to make debt payoff easier.
For example, if you have federal loans, explore income-driven payment plans that cap payments as a percentage of income. These can make monthly payments affordable and also provide loan forgiveness after a certain number of on-time payments.
The important thing is to be proactive in dealing with your debt. You likely don't want to be stuck paying your student loans for life. And having high monthly loan bills could impact your ability to retire. Tackle your debt problem as soon as you can by refinancing or finding a solution that makes sense for you.