Student Loan Refinance ($93,974)

I’m not going to wax poetic with you here about Elizabeth Warren.  Interest rates go up and down. When interest rates go up, we don’t ask the federal government to adjust our fixed rate loans accordingly, now do we? Because they’re fixed rate loans.  People want the benefit of a variable interest rate when it helps them, but they don’t want the risk of rising rates.  I don’t think the government should adjust rates on the contracts we entered into.

With that said, I think there should be a MARKET for refinancing student loans, and there seem to be some options out there. Should a bank refinance your loan if you aren’t currently paying? No, because that looks pretty clearly like a bad investment of their funds.  Should you be able to refinance if you have good credit, and a good history of paying your loans? Yes–this can be a good deal for banks, as they are getting an interest rate on their money (say 5%), and for the borrower who is currently paying, say 6.625%.  The thing about student loans is that they generally come from the government, or the government otherwise allows them to not be discharged in bankruptcy because otherwise no one would give an 18 year old that much credit in the first place.  Non-dischargability is the price you pay for the ability to borrow when no one in their right mind would lend you money.

I’ve completely gone off on a tangent on the purpose of my original post.  I found a bank that offers loan refinancing in my area and applied.  The lowest interest rate they offer is 4.74%.  Still much higher than what current students are getting, but much lower than the 6.625 I’m currently paying on most of my loans.  Could be a good deal, but without the benefits of borrowing from the federal government (the possibility of income based repayment if needed down the line; special programs for working in public service or being in the military).  I was willing to forego these benefits and applied.  I got two different emails back. The first told me I needed a co-signer and the second said I need to send them some additional documentation (proof of current payment amounts, paystubs, etc.).  I’m not sure if the first one was sent inadvertently, and the second is what I should be acting on, but I’ll give them a call.

Which brings me to my point.  The man seems to think asking someone to cosign for me is no big deal, but I don’t agree.  I’m not concerned about meeting an untimely death. I have life insurance and can get more relatively inexpensively.  The issue is if for some reason I were to lose my job, and unable to timely find a replacement, it would be bad enough if my credit got damaged, and late fees were incurred.  It’s much worse if someone else like my dad now had to pay the $550 a month, or risk harm to his credit. The $500 a month doesn’t seem like small potatoes to me. I know I would need to make serious changes if I suddenly had an extra expense of $500 a month.

So normally I just write to write, but today I’m going to ask what anyone reading thinks?  Is saving $1,000 in interest a year worth the additional risk to a co-signer?  I don’t mean just in whether you would feel comfortable co-signing, but would you feel comfortable putting the risk on someone else?


N.B.  At the lowest possible 4.74% interest rate, my payment on a 15 year loan would be $558 a month.  That’s $57 more a month to pay off my loan (making minimum payments) in 2029 instead of 2042.  Damn.


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