Refinance Student Loans Through a Credit Union and Better Manage Debt

Student loans are one of the heaviest debt burdens carried by many millennials–not to mention the generations that come after them. Attending college is a high-cost endeavor, and while that cost will help many individuals reach their full job potential and earn a higher income than they could have otherwise, it also means that they’re carrying a heavy debt load. Consider:

• 70% of college students graduate carrying a significant student loan debt load
• The average Class of 2016 graduate carried more than $37,000 in student loan debt–a number that continues to rise for future classes
• 11.5% of student loan borrowers have to default on those loans, and 5.41% of those loans are currently delinquent
• The average student loan payment was around $393 in 2016–and that number continues to rise, too.

Student loan debt is a crushing problem for many individuals–but there is hope. If you’re struggling with student loan payments that are too high, refinancing your student loans through a credit union can help you reduce the burden of that debt, lower your payments, or pay off your student loans faster, depending on your goals.

Why Refinance Your Student Loans Through a Credit Union?

Many students opt to refinance their student loans once they’re out of school, especially as their financial situations change. Depending on their financial situation, opting to refinance student loans through a credit union can be a beneficial choice for several reasons:

Get Lower Interest Rates

When you take out student loans, they often come along with high interest rates — especially once regular payments of principal and interest become due. In 2017, private student loans with fixed rates had an interest rate of 9.66%. Variable rates were not much better, with an average of 7.81%. These high interest rates can substantially increase the amount you’ll pay in interest over the lifetime of your loan–and the higher the interest rate, the higher that amount will be. High interest rates are especially problematic if, for example, you’ve had to temporarily defer payment of your student loans, increasing the amount you owe as the interest rate has time to grow.

Opting to refinance your student loans, on the other hand, can substantially decrease the amount of interest you’ll have to pay on your loans. In some cases, your interest rate can drop as low as 2.47% at the time of this blog, especially if you have a high credit rating (something that making your student loan payments on time all these years is sure to have helped!) or have a co-signer with a high credit rating.

Because credit unions exist to serve their members,  profits roll back to those members instead of to private owners or to the institution–and as a result, credit unions can sometimes offer better rates to their members.

Set Your Payments at a Rate You Can Afford

When you take out a student loan, you’re often stuck with the payments the lender gives you. While you can alter your payments based on financial hardship or according to your income, you’ll have to submit proof–and what you consider proof of difficulty might not be the same thing your lender considers to be a financial difficulty. When you refinance your student loans through a credit union, on the other hand, you’ll be able to set your payments and the duration of the loan at a level that will work better for you with your current budget and your needs.

Consolidate Your Loans

Student loan consolidation is becoming increasingly popular for many graduates who need to manage their loans in one place so that they’re able to pay off one lump sum, rather than being stuck with several separate loans to deal with every month. Loan consolidation accomplishes several things:

• It lets you see exactly how much you owe, which can be highly beneficial when considering other aspects of your financial future–including buying a car or beginning payments on a new home.
• It makes you less likely to miss a payment on one of your loans, since you’ll have just one to make every month.
• It lowers monthly payments to a manageable amount, especially if you have several small loans that you’re struggling to keep track of.

When you took out your student loans, chances are, you took out a loan each year based on the provider that would give you the best rates at the moment–or based on where you were accepted. You might not have had the option of loan shopping, or you might have applied to the lender that was most convenient for you. Now, however, it may be a good time to consolidate your loans and even out your spending so that you’re able to more effectively manage your finances.

How Do You Choose the Right Credit Union?

If you’ve decided that refinancing your student loans through a credit union is the best choice for you, there are several important things to consider when choosing the credit union that will provide the terms you need. Credit unions exist to serve their members. They often carry lower fees, offer lower interest rates, and have the ability to do more for their members than traditional banks. Make sure that you choose the right credit union for your needs.

Use a service that will connect you with different loan offers in one place. LendKey will connect you with a wide range of credit unions–including national credit unions, not just the ones in your local area. By utilizing this service, you can decrease the amount of time you have to spend wading through paperwork to determine whether or not you qualify for a specific credit union. Working with this type of service can also give you a better idea of what loans you qualify for and what rates you can expect when you refinance.

Make sure your credit union offers student loan refinancing. Student loan refinancing through a credit union is a relatively new offering, and not every credit union offers student loan refinancing options. Check with your credit union to make sure that it offers a student loan refinancing product.

Check the membership requirements. Depending on the credit union you choose, you may find that they have specific requirements for membership. If you’re already a member of a credit union, you’re ready to proceed. If you need to apply for a credit union, make sure you fit the membership requirements, potentially including:

• Working for a specific company, since some companies have their own credit unions. Note that these credit unions are often specifically geared toward company employees and helping them with their needs.
• Living in a specific geographic area. Many credit unions were constructed to serve a specific area, and they may not offer membership to those living outside of them.
• Membership in a specific group, including churches, HOAs, other organizations.
• Attendance at a specific school (Note that this does not necessarily mean that you have to have graduated–for some college credit unions, you need only have attended a single class or be a faculty member of the institution.).

Some credit unions will allow family members of current credit union members to join, especially if they meet other specific criteria. Others allow only family members who are able to meet the existing criteria for the credit union.

Consider whether or not the offer will benefit you. You may find that the offer a credit union can make for refinancing your student loans is not much better than the rates you’re already getting. Before refinancing, make sure that the offer is better than your current rates and that it will help you meet your financial needs.

Refinancing and Debt Management: How Credit Unions Can Help

When you refinance your student loans through a credit union, the biggest benefit is debt management. Thanks to your credit union, your student loans are now all in one place. This can help you:

Build a better understanding of your debt-to-income ratio. How much debt do you really have? If you’ve never seen it all in one place, you might find that it’s difficult to picture how much you’re actually paying on your debts each month.

Better understand how long it will take you to pay off your student loans. Many people struggle for years under the burden of student loan debt. When you consolidate your student loans, you’ll get a better look at what you still owe and how long it will take you to pay it off completely.

Pay your loans off faster. With lower interest rates, you can often push through and pay off your student loans faster than you originally thought. Not only that, you’ll be able to see additional payments go straight to the entire loan amount, rather than having to decide which debt to pay down every time you have extra funds on hand.

Student debt can be a serious problem. While refinancing through a credit union isn’t the answer that will solve it all, it can help reduce your burden and improve your debt management skills. Ready to refinance your student loan debt? Contact us today to learn how we can help you choose the right loan for you.