Student Loan Refinancing Ladder | Student Loan Planner


What is the Student
Loan Refinancing Ladder? And how can you use it to save yourself thousands of dollars? We did a survey of Student
Loan Planner readers, and the findings kind of shocked and horrified me frankly,
which is where the concept of the Student Loan Refinancing
Ladder originated from. What we found from this
survey was of the people who had refinanced, and
there was about 200 who had, only 10% of them had refinanced twice, and less than 3% of them
refinanced three or more times. That might not be that big of a deal, because perhaps people are
getting such amazing rates that they’re not needing
to refinance another time. That would be the ideal result, right? But then, in another one
of the responses we asked the question, how big of an
interest rate improvement would you need to refinance
your loan the second time? And over 60% responded and
said that they would need a 2% or better interest rate in order to refinance their loans a second time. And goodness sakes, that was
ridiculous to find that out because student loan refinancing is not like doing a mortgage refinancing where you have a real significant charge and having to get another appraisal, and having upfront costs
for doing the refinancing, and having it really be a lot
of effort to do that, right? Student loan refinancing
is actually something that is a zero-fee transaction
in the sense that you get a new loan, hopefully at
a lower interest rate, so you save money immediately. But, also, with Student Loan Planner you actually get cash back bonuses of 200, to sometimes up to $1000
to refinance your loans. And a lot of sites that’s
not the case, you get zero. But because we give back the
majority of the bonus to you, and that’s the strategy of
our business is to offer you the best deals in every
category that we can find, then you could actually
finance multiple times, pick up multiple cash
back bonuses, and use that to get out of debt sooner
if you’re getting a better and better interest rate each time. Now, why would somebody not immediately go with a five year variable rate at a 2.8% or something like that when
you’re refinancing your loans? I’ll give you an example. Let’s say you’ve got a dentist who’s got 200,000 in student loan debt. And this dentist wants
to keep her payment low because she wants to buy a practice. Well, if this dentist decides
to refinance to a five year variable rate her payment
could be $4000 a month. Then, you know, the bank might
not necessarily approve her for the best practice purchase agreement. Which that would be
pretty bad if her plans of maybe buying a house or
buying a practice got impacted by having to have a giant
4000 a month monthly payment, which would impact her
percentage of her income allowed to go to debt in the underwriting process for other things that she wants to buy. So that would be a problem,
but also she doesn’t like the fact that she’s paying six, seven, eight percent on her student loans. So, for this dentist what she can do is refinance to a 15 or a
20 year, which would come with a payment maybe of
about 12 to $1500 a month. Then should could cut her interest rate by one or one and a half percent. And from there she can make
excess payments over and above what she has to make
according to the loan terms because there’s no prepayment penalties for paying down your student
loan debt, especially with the lenders that Student
Loan Planner works with. So, what she’d do is pay
over and above what she owes, and then that $200,000 balance would fall to let’s say 150,000 over time. And if she made aggressive prepayments maybe it would fall to
that within a couple years. At that point let’s say
that she’s at a 5.5% rate for a 20-year term, she
could refinance again with a new company and get
another $500 cash back bonus, and cut that interest rate
from 5.5 to perhaps 4.5, or 4.75%, something like that
for a 10 year fixed rate. What she did was she managed her payment, and kept it low in terms of
what the required payment was, which is gonna give here a better chance to qualify for other kinds of things that she would want to buy,
like a home and a practice. After she makes these
aggressive prepayments, now she’s paying on this 10-year loan, and she pays way more than she has to. And that 10-year loan, you
know, she’s paying and paying on it, and it goes from
150 down to say 75. And now she can refinance
to a five-year fixed rate. And she can drop that 4.5 perhaps to 3.5%, or some other interest rate, depending on what market conditions
would be at that time. And the required payment, again,
would stay about the same. So, this refinancing
ladder is starting off with a very long-term,
refinancing to a 10-year, approximately, or a 7-year. And then the last refi you
would do is to a 5-year, and you could do a fixed or variable rate. We did a variable interest
rate because we wanted to pay off our debt as fast as possible. We wanted the lowest interest
cost that we could get. And we got a low two
point something percent, this was a few years ago. But when you’re down to an amount of debt that you can easily handle
relative to your income, perhaps a half of your income or less, then you might consider taking that variable interest rate risk as long as you’re getting somewhat
compensated for it. Because that variable rate
is significantly lower than the fixed rate that
you’d be getting otherwise. So, those are a couple things
to consider, if you do want to take advantage of the
Student Loan Refinancing Ladder I would visit studentloanplanner.com/refi. R-E-F-I., that’s how you spell that. And you’ll get cash back bonuses if you go through our links. And you should not refinance
at all if your debt to income ratio is over two to one, or if you have interest in doing the Public Service Loan
Forgiveness program or other loan forgiveness programs. Or if you need to maintain
financial flexibility right now because you might be going
through a significant job change. You might be having a change in income, or you have credit card debt, or you don’t have a solid emergency fund. So this is for people who
are very solid financially, know that they’re gonna
pay their debt off, and want to have a risk-managed
approach to refinancing, and pick up a bunch of cash
back bonuses along the way. So, if you have any questions about the Student Loan Refinancing Ladder reach out to us,
[email protected]

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