To refinance student loans or not to refinance student loans? This is the question many Master of Business Administration (MBA) graduates ask themselves. Yes, their degree may bring them a good salary, but the cost of their education often comes at a premium. The average student loan balance for MBA graduates is around $66,300.
In deciding whether to refinance their loans, an MBA student should ask themselves a few questions: How much money will I save? Do I qualify? How will the repayment terms affect me? How does refinancing compare to student loan consolidation? Will refinancing affect my borrower benefits?
This guide on how to refinance MBA student loans will cover your different options, including the pros and cons of each.
Why Would I Refinance My MBA Student Loans?
By looking to refinance your MBA student loans, you can leverage your credit history and earning prospects to save money, change your loan terms, and perhaps put the saved money into extra payments, speeding up how fast you pay off your loan amount. On the other hand, if money is tight, you might be able to extend the length of your loan and lower your monthly payments.
Some of the benefits of refinancing MBA student loans include:
Lower Interest Rate
You may not have had much credit history when you first qualified for student loans, so you may have been saddled with high interest rates and, possibly, a co-signer. Now that you’ve started working, have a history of on-time payments, developed a healthy debt-to-income ratio, and accumulated assets, you’re probably considered a good credit risk and are eligible for a lower interest rate.
If you refinance your MBA student loans, you could be eligible for a new interest rate that is lower than what you currently have, which could save you thousands of dollars over the life of the loan.
Lower Monthly Payments
Refinancing could also mean lower monthly payments, enabling you to pay on time and in full, improve your creditworthiness, and avoid late payment penalties. This is especially advantageous if you need to free up money for other purchases, such as buying a house or car.
However, it’s important to understand that lower monthly payments can be the result of either a lower interest rate or longer repayment period. While a lower interest rate will save you money over the long term, you could actually pay more over the life of your loan if you choose a longer repayment period. So, weigh your options carefully.
One Student Loan Payment
Because getting a master’s degree in business administration can be pricey, some MBA students have to take out multiple loans to cover their education, possibly from different lenders. As a result, it can be difficult to keep track of the different loans and you may miss or accidentally skip payments, which could damage your credit standing. Refinancing allows a lender to pay off any existing student loans so you only have to worry about making one monthly payment to one lender.
How Do I Get MBA Student Loan Refinancing?
When looking to refinance MBA student loans, you have a wide choice of lenders and loan servicers — all with different borrower criteria and terms and conditions. Below are some key points you should keep in mind when deciding if and how to refinance your loans and manage your student loan debt:
Check Your Eligibility
The higher your credit score, the more likely you’ll be able to refinance your MBA student loans at a lower interest rate. Often, a score of 650 or higher is required. However, a poor score on your credit report doesn’t automatically disqualify you. You might overcome this by improving your score, getting a co-signer for the loan, or checking out credit union loan products.
You also need to show lenders that you have the financial means to pay your debt, which means proof of income or a letter of employment. Other factors, such as your credit card history and debt-to-income ratio, can also come into play when your eligibility is being decided. Whether you are a U.S. citizen or permanent resident might also affect your eligibility and loan terms and conditions.
Understand Private Lender Refinance vs. Federal Student Loan Consolidation
Both the federal government and private lenders can offer consolidation loans. While both result in a single monthly payment, there are differences between the two that you should understand.
With federal student loan consolidation, the government combines multiple federal student loans into one loan with a fixed interest rate based on the weighted average of all the loans’ interest rates, rounded up to the nearest .125%. This process is free. However, by extending the payment term, the student may end up spending more in the long run, and the slight increase in effective interest rate with the Direct Consolidation Loans can up the total cost of the borrowing.
Private lenders can refinance federal and private student loans together. Borrowers must, in effect, apply for a new loan for their MBA student debt, passing eligibility requirements. The new loan may come with a lower interest rate than the original loans and be cheaper to pay off in the long run. If you go to a private lender to refinance federal student loans, however, you could give up attractive government options, such as:
- Loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF)
- Repayment plans based on income (income-based repayment)
- Deferment or forbearance governed by federal rules
You can also take advantage of Direct Consolidation Loans or private refinancing to change your borrowing terms, perhaps lowering your monthly payments by extending the length of the loan or switching from a fixed rate loan to a variable interest loan. Some private lenders may offer you a lower interest rate for your refinance loan if you agree to an automatic payment plan.
Check Repayment Plan Terms
Every student repayment plan has its own repayment terms and conditions, which can affect how you pay off your financial obligations. Check the length of the loan, what your interest rate is, your monthly payments, and so on.
Interest rates, fees, and loan limits are usually dictated by your credit history. The length of the loan usually depends on how much money you owe in your student debt. Private lenders also often offer fixed and variable interest rates. Fixed rates tend to be safer because you can predict your monthly payments, while variable rates are riskier, perhaps going higher over the years as market conditions change.
Look for the Best Interest Rate
Looking to refinance your current loans only makes sense if you are going to get a lower interest rate. By shaving a few percentage points off your interest rate, you can potentially save thousands of dollars over the life of the loan depending on the size of the loan and what kind of interest rate you can negotiate.
Keep in mind that an interest rate is similar to but not the same as the annual percentage rate (APR). The interest rate is used to calculate the interest expense on your loan (i.e., how much you have to pay the lender for the privilege of borrowing their money). A 6% interest rate on a $100,000 loan with a 10-year payment plan, for instance, means you would have to pay roughly $3,300 a year in interest fees.
The APR includes the interest expense on the MBA student loan and other costs and fees involved in getting the loan. These might include broker fees, closing costs, rebates, origination fees, and discount points. The APR provides a more accurate picture of what you would pay for the loan.
What Are the Best MBA Student Loan Refinance Options?
Since there are a lot of private refinance lenders out there — each with their own financial products, borrower qualifications, and terms and conditions — it can sometimes be a bewildering experience finding the right one for your needs. CollegeFinance.com can help you with this very important task, providing the resources and lender reviews to help you find the right one to save money and enable you to pay off your MBA student loan faster.
Some good lender MBA student loan refinance options include:
Earnest
This lender makes it easy to refinance your MBA student loans, allowing you to find out in two minutes how much money and time you can save with one of their plans. Variable rates start as low as 1.99% APR and fixed ones at 2.98% APR, both with a 0.25% autopay discount. The lender allows a variety of repayment options and lets you customize your repayment terms.
PenFed
This lender seeks to protect consumers from unnecessary fees and allows borrowers to refinance all student loans, including federal ones, or just focus on the ones with the highest associated costs. The online application process of PenFed is fast and simple. Fixed rates are as low as 2.99% APR and variable rates are as low as 2.17% APR.
CommonBond
This lender offers fixed rates as low as 2.59% to 6.74% APR, variable rates as low as 2.56% to 6.87% APR, and hybrid rates of 2.98% to 6.57% APR (all with a 0.25% autopay discount). CommonBond avoids unnecessary fees and hidden costs and provides 24 months of forbearance over the life of the loan, so you can take a pause from loan repayments if needed.
Laurel Road
Fast loan processing and great customer service are the hallmarks of this lender. You can check your rates quickly and find loan rates pegged to the length of the loan — the shorter the time frame, the lower the rate. For example, a five-year fixed APR would be 2.80% to 4.80%, while a 20-year period would be 4.40% to 6.00%.
Let CollegeFinance.com Help You Find the Best MBA Refinance Lender Offers
Being able to refinance your MBA loans can make a big difference in your life. The good credit history you’ve built up since you graduated from school can be used to lower your interest rate, reduce monthly loan payments, shorten the amount of time it takes to pay off your loan, and get you more favorable terms and conditions.
You can use this extra money to finance other important purchases in your life, build up an emergency fund, pay off other debts, or whatever you desire. Of course, finding the right lender is key to accessing all the potential benefits of refinancing. This is where CollegeFinance.com comes in.
We can help potential and current borrowers understand loan terms, learn more about online lenders, explore loan options, help with the application process, and make sure you start realizing the full value of your MBA degree sooner.
FAQ: Refinance Lenders
Is It a Good Idea to Refinance My MBA Student Loans?
The answer depends on your personal financial situation and goals. If you have steady employment, a good credit history, and a desire to pay down your MBA student debt, it might make sense to refinance your loans, lowering both your interest rate and monthly payments.
Even if you aren’t well-employed or have a low credit rating, it might still be worth exploring your refinancing options. You could work on repairing your credit rating or turn to other options for refinancing, such as credit unions or getting a co-signer for the new loan. As long as you can get a lower interest rate and better terms and conditions, it can be worth the effort.
What Credit Score Do I Need to Refinance My MBA Student Loans?
Standards for what credit score you need to refinance your federal or private student loans, as well as other eligibility requirements, vary from lender to lender. Check each one to see what they expect. Of course, the higher your credit score (as a rule of thumb, 650 or higher), the better your chance of qualifying for a loan and getting the best rates.
Should I Refinance My MBA Student Loans or Get a New Student Loan?
This is not an either-or proposition. If you apply to refinance your MBA student loans, you’re seeking to get a new loan that you will use to pay off your old debt, presumably at a lower interest rate or at repayment terms that allow you to pay off debt faster or lower your monthly bills. Because this is a new loan, you need to meet all the qualification requirements, including ones involving income, credit history, debt-to-income ratio, and more.
