It is quite common for borrowers to refinance mortgages and other loans once their interest drops. But did you also know that it is possible to refinance student loans too? In the past, it would have been hard to come across options on how you can refinance your student debt. But thanks to promising developments, debtors can now get this load of debt off their backs. It is estimated that about $1 trillion is owned by students as loans.
President Obama has done his part by expanding a program that limits one to repay his/her federal student loan to 10% of his/her income. The US Senate is also set to introduce a bill that gives more protection to students who take private loans.
Institutions in the private sector are also coming up with innovative ways on how students can repay their loans comfortably. Refinancing can be a bit difficult using the big banks, but these innovative start-ups have figured out how to make profits by helping individuals clear their student loans.
Pave, a company based in New York, applies crowd funding to buy out existing loans. This is then repaid according to the income of the borrower. Pave loans end up costing almost the same as other loans even without considering the fees. This is large because of fees. However, the company offers more flexibility and forgiveness than most banks would when it comes to repaying.
For instance, if a borrower makes less than one and a half times the poverty level, their repayments can be deferred. Pave also factors in the borrower’s profession and repayment ability before coming up with a repayment rate.
SoFi is another company based in San Francisco that offers low fixed rates, variable interest and career coaching to its borrowers. In the long run, you will end up saving an average of $9400 over a period of 10 years. However it is not as flexible as Pave for it only considers graduates who are highly qualified. SoFi also offers a six-month grace period for borrowers trying to get into entrepreneurship, though the interest will still continue accumulating.
Upstart, a startup founded by former Google employees also aims at saving borrowers money. It, however, considers one’s former school, academic performance and work history before lending. Upstart only lends low-interest loans to students it considers as high quality. The company is backed up by Mark Cuban and Eric Schmidt.
A couple of bigger banks consolidate student loans, making it easier for borrowers to make a payment every month. However, it is hard to refinance student loans with these banks. Credit unions are somehow easier to work with.