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

By Julissa Treviño Updated on May 7, 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.


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