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Student Loan Refinancing
July 2, 2017
1:11 pm
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Rocky
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Hello,

I have a student loan of $99,800 with American Education Services (AES) with a fixed rate of 7.75%. I am in my forties and attempting to make significant reductions in the student loan. Recently, I have been shopping to refinance my student loan. I have two accepted offers through two companies, Earnest and Sofi. Earnest is offering a sliding scale for a fixed rate, which, at a minimum would lower my interest rate by two percentage points. Sofi is offering an variable rate of 4.59%. If I were to refinance through a private loan company, I could not have much forbearance or deferment protections as I would with AES. However, I could potentially save several thousands of dollars.

I requested over the last several years to AES to reduce my interest rate. All times I was denied because the loan is consolidated. I am looking for sounds advice on possible next steps to reduce my interest rate and save thousands of dollars. I am working to pay off the loan quicker, but realistically it will take about 15 years. An interest loan reduction would help achieve that goal.

Thoughts?

July 3, 2017
9:43 pm
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Indiana
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Forum Posts: 201
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May 3, 2014
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Rocky,

Are these federal loans or private loans? Based upon your question, it sounds like they are federal loans, but I want to make sure.

The analysis here is much different for federal loans than it is for private loans.

July 5, 2017
11:55 am
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Rocky
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These loans are federal consolidated loans through AES. In 2007, the loans were consolidated with a fixed interest rate of 7.75%. As mentioned, when asking for lowering of interest rates, AES has denied me. I need to get this albatross off my neck, as the loans are preventing me from financially getting ahead. That is why I am examining all my options, including going through Earnest or SoFi.

The loans are FFEL.

Are there any options remaining for me on the federal level?

July 6, 2017
10:21 am
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Indiana
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May 3, 2014
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There are currently no options to get your federal loan interest rates lowered. This is actually something that has been proposed in Congress many times over the last few years, but to date there has been little progress. It is definitely a possibility in the future, but certainly not the near future.

Refinancing has the potential to lower your interest rate, but it can be a risky move. If you refinance, your loan becomes a private loan and loses all of the federal benefits. That means no income-driven repayment, and no student loan forgiveness. These are huge advantages, and once you refinance there is no way to undo it. So be certain that it is the right choice for you.

If you do decide to refinance, don't limit your search to just two lenders. There are over a dozen companies offering this service. A list can be found here: http://studentloansherpa.com/s.....n-reviews/ You should take the time to check your rates with as many lenders as possible. Each company evaluates applications differently, so it is impossible to know who will offer you the best rate. A slightly lower interest rate could save you a bunch of money given the size of your balance.

In short, you have two steps that you need to take. First, make absolutely certain that you are ready to give up the federal status of your loans. Your servicer won't provide warnings, nor would a private lender. It is all on you. Second, if you decide to refinance, cast a wide net to make sure you are getting the best rate.

July 12, 2017
9:39 am
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Marco Desalis
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I am having trouble with my loans I am looking to refinance but am not sure what scams are out there/who will make me pay for services that I can do for free. I want to have as much of my debt forgiven as possible, and also make payments according to my current salary as ratio to my debt. Can anyone help?

July 12, 2017
9:50 am
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Indiana
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Forum Posts: 201
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May 3, 2014
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If you want your payments to be based upon your salary and you want to get the debt forgiven, you need to keep your loans with the federal government. If you refinance federal loans you lose these perks.