Quiz: Are You Paying Too Much for Your Student Loan?

Julissa Treviño Updated on May 14, 2019

Since graduating from college, you may have buckled down and gotten serious about your finances — improving your credit score by paying your bills on time and establishing a good history of stable employment. 

Unfortunately, this doesn't change your terms for the student loans you borrowed years earlier. While it may not have occurred to you, you may be paying too much for you student loans, and you may be eligible for better interest rates or a lower monthly payment through refinancing.

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Whether you have private or federal student loans, the fact is that you may be able to get a significantly better deal by looking into private refinancing. Lowering your interest rate even 1% can save you thousands of dollars over the life of your loan. 

Here's how to tell if you've been paying too much — and how to determine if you could benefit from refinancing.  

Do you have a good credit score?

Your credit history is one of the biggest factors used by lenders to determine whether you qualify for a loan, how much you qualify for, and your interest rate on the loans you qualify for. 

Those with less-than-great scores are typically offered higher interest rates than applicants with better credit. 

But if you have a good credit score now — and if it's better today than when you borrowed the loan — chances are that you could qualify for a better interest rate. Being locked into a rate you received when your circumstances were different means you aren't taking advantage of how much your credit has improved. 

Do you have stable employment?

Lenders want to know that you'll be able to repay your debts, so they take your employment history into account when they give you an offer on a loan. But, when you're applying for loans in college, you probably didn't have very stable employment apart from working at a fast food joint during the summers. Plus, you probably took out federal loans, which don't consider your past employment at all. 

So now that you've got a good job, and you can show that you're bringing in a steady paycheck, you're a better candidate for better loan terms. In this case, not refinancing means you're basically flushing money down the toilet.

Are you current on your student loans?

In addition to your credit score and your job history, your repayment history — that is, whether you're current on your student loans and whether you've consistently made on-time payments — is a marker of your creditworthiness.

On-time payments shows to lenders that you're serious about repaying your debt, and this means you could be eligible for a better interest rate or a lower monthly payment through refinancing. 

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Do you want to lower your monthly payment or pay off your loan faster?

Among the biggest struggles of managing student loan debt are monthly payments that are too high compared to your earnings and/or the fact that it's taking you too long to pay off your loans. In these cases, you may have realized that your too-high student loan payment isn't leaving you with much at the end of each month, or you may instead wish you could use that money for another financial goal, like saving for a house.

Refinancing is one of the several options you have when you want to lower monthly payments or pay off loans faster. People who refinance their student loans save an average of $253 a month and $16,183 over the life of their loans. 

Here's exactly how refinancing can help

When you refinance, you take out a new loan with new loan terms that are based on your current credit score, your stable job history, and your history of making on-time payments. These positive improvements in your overall financial situation mean that you may be able to your loan terms for the better.

Through refinancing, you may be eligible for a reduced interest rate and better loan terms, such as a lower monthly payment or a more flexible payment term. In this end, this is a good option if you think you may be paying too much for your student loans. 

See also: Is Student Loan Refinancing Right for You? 

Published in: Refinance

About the Author
Julissa Treviño

Julissa Treviño is a writer and journalist based in Texas. Her work has appeared in BBC Future, CityLab, Columbia Journalism Review, The Dallas Morning News, Racked, Teen Vogue and other publications. She enjoys traveling, playing with makeup, biking and trying new food. Follow her @JulissaTrevino. Read more by Julissa Treviño

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Earnest empowers people with the financial captial they need to live better lives.

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Click here to apply with Earnest and to see how much you can save.

#2 View More Details

Many ELFI customers save hundreds per month month and thousands over the length of the loan term.

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Education Loan Finance is designed to assist borrowers through consolidating outstanding education loans into one single loan that effectively lowers your costs of education and/or makes repayment very simple. Education Loan Finance - backed by the strength of SouthEast Bank - combines the benefits of traditional education loan refinancing with the superior products, service, and support found in the private market.

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Check out their low rates today to see how much you can save.

  • Get Your Rate. With Education Loan Finance's Find My Rate tool, you can complete a short application to receive a preliminary quote on your eligible rates and terms, all without affecting your credit score.
  • Apply in Minutes. Education Loan Finance's online application is fast and simple.
  • Outstanding Personalized Service. Our Personalized Loan Advisors specialize in student loan refinancing and help busy professionals find the option that's right for them.
  • Student Lending Experience: Education Loan Finance isn't a start-up company - we have a longstanding history and expertise in serving student loan borrowers.

Attractive Bonus and Referral Programs:

  • Education Loan Finance Fast Track Bonus**: Education Loan Finance's application process is streamlined and simple, and you can earn a $200 bonus just for closing your loan within 30 days of your initial application.
  • Education Loan Finance Referral Program**: Earn $400 for each new Education Loan Finance Client referred by you!
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LendKey operates student loan programs for over 275 not-for-profit and community lenders across the country. By partnering with these lenders, LendKey is able to give consumers direct access to the best rates available from the most borrower friendly institutions. As the servicer of all loans obtained through its platform, you can rest easy knowing your personal information will be safe and that the best customer service team will be ready to answer your questions from application until your final payment.

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Get a personalized quote from LendKey now.

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Operates in all 50 states; 2nd largest student loan refinancing lender

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Laurel Road is a national online lender with customers in all 50 states, the District of Columbia, and Puerto Rico. Many of our non-bank competitors are not able to lend in all 50 states.Laurel Road has grown to be the second largest player in the student loan refinancing space in large part because of our reputation as the go-to low rate provider.

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  • Customer service reputation - Laurel Road's customer service representatives are no rookies. With 19 years of experience on average, Laurel Road’s Customer Service team delivers an experience that is best in the industry. They work to build meaningful, life-long relationships with our valued customers to improve their overall financial wellness.
  • The stability & security of a bank - They are a division of Darien Rowayton Bank, a stable and secure FDIC-insured bank, regulated by the FDIC and the Connecticut Department of Banking.

Get your personalized, pre-approved rates in less than 5 minutes.

#5 View More Details

For every loan they fund, they contribute to the education of a child in need

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CommonBond was founded in 2011 by three MBA graduates from the University of Pennsylvania’s Wharton School who wanted to help their peers escape from high-interest student loan debt. Its original focus was on grad students, but it has since expanded to cover undergrads as well.

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  • Unemployment protections - If you lose your job or decide to go back to school, you can delay your payments for up to 24 months.
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  • Hybrid loan option - Offerings include a 10-year hybrid loan with fixed interest for the first five years, and variable interest for the final five.
  • Referral bonus - For every friend you refer who refinances their loans with CommonBond, you’ll earn a $200 cash bonus.
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Get a personalized review of your refinancing options with CommonBond today.

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Offers unemployment protection and career/coaching/networking

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Visit SoFi View Loan Disclosure

SoFi, which stands for “Social Finance,” was created by a group of Stanford business students who found themselves with a mountain of debt after graduation. They set out to change the student loan industry and help borrowers like themselves to get lower interest rates. SoFi has some of the lowest interest rates and, unlike the other lenders we reviewed, it has no maximum amount you can finance. However, Nevada residents can’t currently refinance with SoFi. Minimum loan balances are higher in Arizona, Massachusetts and Pennsylvania due to state laws. Additional state restrictions may apply.

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Find out what interest rate SoFi can offer you here.

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Special offers for medical resident and fellow refinance products

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Splash Financial is a leader in student loan refinancing with new rates as low as 3.25% fixed APR which can save you tens of thousands of dollars over the life of your loans. No application or origination fees and no prepayment penalties. Splash Financial is in all 50 states and is intensely focused on customer service. Splash Financial is also one of the few companies that offers a great medical resident and fellow refinance product. You can check your rate with Splash in just minutes.

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Click here to see more of Splash's offerings and to see how you can save money.

Comments

I reduced my student loan payment by $152 per month, by refinancing thru Nitro:

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