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Student Loan Advice -- Should I refinance
September 20, 2018
11:16 pm
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September 20, 2018
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Hello everyone, looking for much needed guidance on whether I should refinance or not.

Currently, my student loan balance from law school is 235k and I am in the repaye program paying 1410/month. My interest rate is 6.75% and I earn approximately 185-200k. I have 16 1/2 more years of payments prior to forgiveness as my payments are only covering $100 over the monthly interest accrual.

Since starting working, I have been able to save funds that were going to be put towards a condo but now I am contemplating putting 90k towards my loan and refinancing the remaining 150k for a 10 year repayment at 4.58% or 5.09% interest rate which would bring by monthly payment to approximately 1560/month during the 10 year term.

I am worrisome regarding my current repaye program as I am anticipating marriage in the next couple years and my girlfriend has around the same income as I do. I’m worried that our combined income will make a monthly payment unrealistic as we separate our finances. Also, I don’t believe I would qualify for the ibr given my income if I do get married. I had been patiently waiting hopefully that there would be a restructuring of the student loan crises but I haven’t heard any updates regarding changes.

Please help, I greatly appreciate all guidance.

Thank you.

September 21, 2018
10:28 am
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lawdebt,

You are definitely facing a high stakes student loan decision.

From a purely math perspective, it sounds as though you will definitely save more money by paying off you debt aggressively, which usually means refinancing.

However, the risk in this move is that you are making a huge bet on your future earnings. Based upon your salary, it sounds like you are probably at a larger law firm. Do you expect to be there for the next 10 years? If you leave your current job for whatever reason, can you secure a similar income?

With the federal loans, you are somewhat protected in that scenario (being married complicates things a bit). If you refinance, a drop in income could be a major hardship.

Also, have you shopped around on the 10 year repayment options? At present there are at least 3 lenders at 4.5% or below on 10-year fixed-rate student loan refinancing.

Ultimately, this is a question that only you can answer as there are major pros and cons to both options.

September 21, 2018
12:54 pm
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Thank you. I am weighing the benefits of keeping the loan with the federal protections versus the lower interest rate with private refinancing which would be about $161/month difference between my current 6.75% federal interest and potential 4.5% private interest on a 145k loan to repay in 10 years if I switch to a standard plan.

Not sure if the federal benefits outweigh the potential 20k saving in refinancing but it is always nice to have the security knowing that I am protected in the event of a salary cut/unexpected scenario.

Thanks again.

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