The next year looks fairly promising for borrowers who will be looking to refinance their student loans.
Obviously it isn’t possible to say exactly what interest rates will look like one year from now… I can’t even say for certain what they will look like in a month. However, there are a number of factors that are certainly positive signs for borrowers in 2019.
The Student Loan Refinance Marketplace is Healthy and Competitive
Competition for consumers usually means better products and better services. If you have only one internet provider in your area, you probably know how bad things can get when there is no competition… but I’ll save my Comcast rant for another time.
Over the last few years we have seen a number of lenders offer refinancing services and we haven’t really seen many companies crash and burn. Last year for example, we saw the continued growth of SoFi. They made a name for themselves in student loan refinance and the company continues to grow and expand, as evidenced by their massive advertising campaigns. On the other end of the spectrum, we have seen brand new lenders like Splash come in and hit the ground running. The fact that there are about 20 different companies providing refinancing services means that these lenders cannot afford to suck.
The competition also means that lenders are getting more forgiving with the loans they approve. Many readers have reported favorable outcomes with less than perfect credit scores and incomes. This means better rates for more borrowers.
However, competition among lenders isn’t the only reason to be optimistic going forward.
The Economic Conditions are Right for Favorable Interest Rates
The economy continues to be relatively strong. Employment rates are high and the very wealthy have money to invest. Normally this means a booming stock market.
However, ongoing trade wars and political instability in Washington have been a drag on the stock market.
This unique combination means that investment money is out there, but it isn’t going directly to the stock market. Investors will look into alternative opportunities, including securities based upon student loans. Increased investor demand for student debt means they will require a lower return on the investment… for borrowers, that means lower interest rates.
The Strategy for taking Advantage of the Circumstances of 2019
Unlike a mortgage, there isn’t a cost to refinancing student loans. The only real “expense” is the time spent seeking out the lowest rate.
Because there is no cost associate with refinancing, borrowers have the luxury of locking in lower rates each time they drop. There is no need to try and guess when rates will be lowest.
Another advantage that student loan refinance rates have over mortgage refinance rates is that the interest rates do not change daily. This means that checking refinance rates can be done about once a month. Checking market rates doesn’t require an application or spending any time. Practically speaking, it can be done just by visiting our page tracking interest rates. If rates have dropped since the last time you applied, it is worth investigating. If they are the same or have gone up, it is unlikely that you will be able to improve over your current rate. The exception would be if your income or credit score have increased recently.
Sherpa TipYou probably don’t want to refinance your federal government loans, be sure to understand all of the consequences of refinancing before doing it as there is no way to undue a student loan refinance.
2019 could see some excellent interest rates for student loan refinancing. At the onset, the conditions are definitely right.
Though nothing is set in stone and a major event could change things, the future appears bright for borrowers looking to refinance in 2019.