While age itself isn’t a reason to refinance your student loans, your income, credit and financial goals may make refinancing worth exploring at different stages. Here’s a look at what borrowers in their 20s, 30s, 40s and beyond may want to consider.
In Your 20s: Getting Your Financial Footing
For many borrowers, their 20s are the first few years of making student loan payments while also navigating a new career, housing costs and other day-to-day financial necessities. Creating a list of monthly expenses and savings goals is helpful in determining your bigger financial picture.
If your income has increased since you graduated or your credit history has improved, it may be worth exploring whether you could qualify for a lower interest rate by refinancing your student loans.
Things to consider:
- Has your credit score improved since you originally borrowed?
- Has your income increased or become more stable?
- Could a lower interest rate reduce your monthly payment or total interest?
- Do you want to shorten your repayment term and pay off your loans sooner?
- Are you comfortable giving up any federal loan benefits* if you’re considering refinancing federal loans?
If you’re still early in your career, you may want to prioritize building an emergency fund and saving for other financial goals before committing to a shorter repayment term with a higher monthly payment.
Tip: If your budget allows, you could also consider making extra payments toward your loan instead of changing your loan terms.
Learn more in our article, Recent Graduates: How Refinancing Could Help You Take Control of Your Student Loans.
In Your 30s: Balancing Loans With Other Financial Goals
By your 30s, you may have a clearer picture of your career and earning potential. You may also be balancing student loan payments with buying a home, saving for retirement, starting a family or other major expenses.
Ask yourself:
- Could refinancing lower my interest rate?
- Would a different repayment term better fit my budget?
- Am I trying to free up money for other financial goals?
- Could I afford a higher payment if it meant paying off my loans sooner?
- Have my financial circumstances changed since I first took out my loans?
Refinancing could potentially help you lower your monthly payment, reduce the interest you pay or create a shorter path to becoming debt-free. Use our calculator to compare your current rate, potential new rate, monthly payment and repayment term to see how refinancing could affect your budget.
Tip: If you’re considering refinancing federal student loans, remember that refinancing with a private lender generally means giving up federal benefits and protections.
Considering refinancing as a couple? Read more about How Marriage Changes the Math.
In Your 40s: Looking at the Bigger Financial Picture
If you’re in your 40s, student loans may be competing with other long-term priorities, such as retirement savings, a mortgage or helping your own children pay for college.
At this stage, refinancing may be less about simply lowering your payment and more about determining how your student loans fit into your overall financial plan. A lower interest rate could reduce the amount of interest you pay, while a shorter repayment term could help you pay off your loans sooner to focus on other endeavors.
Consider:
- How much interest could you save with a lower rate?
- How many years remain on your current loans?
- Would refinancing change your monthly payment?
- Would paying off your student loans sooner allow you to focus on other financial goals?
Keep in mind that a longer repayment term may lower your monthly payment but increase the total interest you pay. And if you’re already close to paying off your loans, refinancing may not provide enough benefit to make switching worthwhile.
Tip: See if your employer offers student loan payment assistance.
In Your 50s and Beyond: Evaluating Your Remaining Debt
If you’re nearing retirement and still have student loan debt, take a close look at the remaining balance, interest rate and repayment timeline. Ideally, your loans should nearly be paid off and refinancing may not provide enough savings to make switching worthwhile.
Discuss your retirement plans with a financial planner to see how your remaining student loan debt could factor into retirement savings and overall financial strategy.
No Matter Your Age, Compare Your Options Carefully
Before refinancing, compare monthly payments, repayment terms, fixed vs. variable rates, fees and loan protections from various lenders, including credit unions.
The right time to refinance isn’t determined by your age – it’s when your current financial situation and goals make a new loan worth considering.
*Important: Please remember that federal loans do offer certain benefits and protections that do not transfer to a private loan. By refinancing your federal student loans to a private loan you will lose any federal benefits that may apply to you. Please review this important disclosure for more information.
Loans subject to credit approval and additional criteria. Carefully consider whether consolidating your existing student loan debt is the right choice for you. Any reduction in your monthly payment may result from a lower interest rate, a longer repayment term, or both. Extending the loan term could increase the total interest paid over time.
