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Refinancing: Not Always Such a Great Idea for the Student Loan Borrower

Person holding up a chalk board with "Student Loan" written on itPerson holding up a chalk board with "Student Loan" written on it

At the time that you took out your student loan, you probably had many things on your mind—and those future monthly payments probably were not at the top of the list–not to mention something like refinancing. For most of us just heading into college, we are excited about the experience, a class schedule that seems both stimulating and challenging, crisp new books to study, a bold new social life, and after years in school, a successful career. Life happens along the way though, and unfortunately, so does the accumulation of bills.

As time wears on, along with dealing with other cumbersome monthly payments, you may decide that you have had enough of the current student loan burden and need to find an alternative solution. While filing for bankruptcy is an option for other debts, as a rule, it is historically very difficult to have a student loan discharged in Chapter 7. While you may see some reprieve in filing for Chapter 13, bankruptcy, the loan is not going away.

Refinancing a Student Loan May Not Be Beneficial

Refinancing seems like the logical solution for many; however, a recent Forbes article outlines exactly why that may not be the best idea in regards to a possible new $60 billion government program. The student loan problem is the US has received a lot of attention recently—and especially as it has outpaced credit card debt—rising past $1.3 trillion now. Amidst repayment programs, offers to allow deferment and forbearance, other recent plans have been proposed for student loan borrowers in the US.

This would seem to be an attractive time to refinance a student loan—or any loan for that matter—as interest rates lower. A new study shows that it would be a pretty big waste of time for most Americans struggling under the weight of such debt though to take advantage of the new government proposal—in fact, they might see as little as an $8 reduction in their student loan payments every month. And to put it further into perspective, the study shows that those who have as much as $44,000 in student loan debt would see a savings of around only $15 per month. Considering taxpayers would be on the line for this $60 billion new program, it is hard to see much benefit, for anyone.

“On average, households would save $8 per month. Borrowers who have not earned a bachelor’s degree would see the smallest difference, in part because their current monthly payments are already relatively low; the average borrower with only a high school diploma saves about $7 a month,” states information in the study. “Meanwhile, the typical student with a bachelor’s degree saves $9 per month, as does the typical borrower with a master’s or professional degree. This difference in savings stems from the fact that borrowers with higher levels of educational attainment typically have higher amounts of debt, making a lower interest rate more valuable to these borrowers.”

The Interest Reduction Must Be Substantial

For student loan borrowers who are eligible, they are much better off to refinance with private companies that can give them a substantially lower interest rate. The problem is that by the time many borrowers realize they are in trouble, their credit has already diminished substantially. The key is to find a realistic plan that borrowers can stick to—and of course, as many have pointed out, the true solution is for more guidance to be offered to students up front when they are taking out the initial loans.

Person holding up a chalk board with "Student Loan" written on it

Contact Us For Help with Student Loan Debt

If you currently have student loan debt as well as other debt that is of concern or if your finances need an overhaul, an experienced attorney from Fitzgerald & Campbell, APLC can review your case and discuss all the available options with you. Our attorneys have decades of experience in serving clients as they navigate through challenging financial situations, to include student loan issues, bankruptcy and other debt management processes. Let us review your case and discuss what would work best for you. We are here to help!

Call us today for a free consultation at (844) 431-3851, or email us at

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