Gabe Rubin

speaker

468 appearances 13 recordings 1 series first heard Apr 2018 last heard Oct 2023

Gabe Rubin’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Is Now a Good Time to Refinance Your Student Loans? · 5 Oct 2023 podcast

You can either change the rate on your loan, hopefully to make it lower, or you can change the term of that loan, which means that if you would prefer to make smaller monthly payments over a longer period of time, you can choose to do that.

So in a general sense, refinancing allows a student loan borrower or really any other type of borrower to do two possible things.

So you're effectively removing that loan or those loans from the federal system.

So what you have to do is consolidate all of your loans into a single loan, which then gets removed from the federal system.

And what that does is it produces a blended interest rate.

So that's basically a mathematical formula that combines the rates of your various loans that you might have.

You might have multiple student loans and it goes into one and you get a single rate.

And after that, you can choose to refinance it and get a lower rate or change the term.

What that does, though, is it opens up a couple of risks.

And those risks include that by being out of the federal system, you're no longer able to get that loan forgiven in a case of mass debt forgiveness.

And also, it's not eligible for many of these debt repayment programs that the government offers, including the new save or saving on a valuable education plan that could really lower someone's monthly payments.

There are a lot of risks involved in consolidating and refinancing.

Definitely a trade-off, and it doesn't make sense for lots of borrowers.

Yeah, so this doesn't apply completely across the board.

There are exceptions, but for most borrowers, especially those with undergraduate loans, it really doesn't make sense right now for those people to refinance because we're in a high interest rate environment.

If you've been following what the Federal Reserve has been doing,

They've been raising rates for over a year now to try to lower inflation.

And what that means is that credit costs more throughout the economy.

So the refinancing rates that are out there are not going to be as attractive as they were, say, a year or two ago, which makes refinancing your federal loans a lot more of a gamble and a lot less of a benefit for most borrowers.

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