Student Loans in the News: Refinancing Your Loans
A brief round-up of recent articles and blog posts that discuss current student loan debates and data
About the author: Kevin Mahoney, CFP® is a fee-only financial advisor in Washington, D.C. Kevin's work with his clients focuses on paying off student loans, buying a house, investing savings, and budgeting. Kevin is the founder & CEO of Illumint, a virtual financial planning firm specifically designed to help couples and young families with their financial decisions.
3 things to understand before you refinance your student loans, according to a financial planner
Author Eric Roberge writes:
"If you can significantly lower your interest rate, you might also pay less on your loans in total. But this is where you have to be careful, because refinancing may actually cost you more in the long run.
Paying less in interest is, theoretically, the way to go if you want to save money on your loan — but refinancing isn't free.
When you refinance, you essentially take out a new loan. That comes with origination fees and can also reset the clock on your loan term. If you originally had a 10-year loan that you've been paying off for three years, refinancing could mean starting over with Day 1 on another 10-year loan.
That extension of your loan term could actually negate any cost savings a lower interest rate provided. You'll still have a lower monthly payment, but may end up spending more on your debt over the life of the loan."
3 Moves to Make Before Refinancing Your Student Loans
The Motley Fool
Author Maurie Backman writes:
"If you have student loans whose monthly payments eat up an uncomfortable chunk of your income, you may be motivated to refinance that debt. Refinancing is the process of swapping one loan for another. You can do it with all types of debt -- not just student loans. However, the upside of refinancing student debt is that you can generally do so at no cost (whereas, for example, if you refinance a mortgage, there are closing costs involved).
Refinancing your student loans makes sense when you're convinced you can snag a lower interest rate on that debt than the one you're currently stuck with. Generally speaking, refinancing works better in the realm of private student loans than with federal loans. That's because federal loans are regulated by the government, and their interest rates are capped at a reasonable level. By contrast, private lenders can charge what they want, so often there's savings to be reaped by refinancing.
However, no matter what type of student loans you currently have, there are a few key moves you should make before refinancing them. Here are three steps it especially pays to check off your list."
[Read the entire article over at The Motley Fool]
Got student debt? You may be able to lower your tax bill
Author Annie Nova writes:
"The IRS allows certain borrowers to deduct up to $2,500 in student loan interest each year from their taxable income, and it can come from payments to federal or private student loans, said Mark Kantrowitz, the publisher of SavingForCollege.com.
Some 12.5 million people claimed the deduction in 2017, which went into effect with the Taxpayer Relief Act of 1997. That means nearly 1 in 3 borrowers take advantage of the write-off. Still, many others could be getting the relief.
“I’d estimate that about a third of eligible borrowers aren’t claiming the student loan interest deduction,” Kantrowitz said. To be sure, not everyone making student loan payments qualifies.
Regardless of the interest that has accrued on your loans over the year, you can only deduct from the amount you’ve paid.
Also, to claim the full break, your income must be below $70,000 if you’re single, or $140,000 if you’re filing jointly with a spouse. If your earnings are above a certain amount ($85,000 or $170,000, respectively), you can’t take advantage of the deduction at all. However, you don’t have to itemize on your return to utilize it."
[Read the entire article over at CNBC]