Medical School Graduates using Credible’s multi-lender marketplace to refinance student loan debt with the goal of reducing their interest rate, repayment term and total amount repaid can expect to save nearly $50,516 over the life of their new loan.
That’s according to an analysis of loans refinanced by borrowers using the Credible marketplace from December 12, 2013 to December 13, 2017.
If you’re deciding whether or not you should refinance your school loans, see just how doing so can potentially save you thousands of dollars on interest alone.
Medical School Graduates who chose a loan with a shorter repayment term in order to get the lowest interest rate and maximize overall savings will pay $50,516 less over the life of their new loan, on average.
Borrowers refinancing student loans can reduce both their monthly payment and the total amount repaid when they refinance into a loan with a lower interest rate and a repayment term that’s comparable to their existing loan.
They can also choose to maximize total savings by refinancing into a loan with a shorter repayment term, or shrink their monthly payment by choosing a loan that stretches their payments out over a longer period of time.
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What the numbers say
Credible’s analysis broke users into two groups:
- Those focused on reducing their interest rate and repayment term in order to decrease the total amount repaid (group one), and
- Those who were aiming to reduce their monthly payment by increasing their loan repayment term (group two).
Because loans with shorter terms generally have lower interest rates, borrowers who chose loans with shorter repayment terms saw the greatest interest rate reduction.
How to use these numbers
The interest rate reduction and savings you could realize by refinancing your student loan debt depend a number of factors, including:
- The strategy you pursue — maximizing overall savings, or reducing your monthly payment
- The type of loan you choose (short or long repayment term, fixed or variable interest)
- The amount you refinance
- Your credit and earnings history
If you have less student loan debt than the average Credible user, your savings from refinancing could be closer to the median lifetime savings provided for each group.
This analysis of thousands of borrowers who have refinanced their student loan debt through Credible is only intended to be a starting point for further research.
Requesting rates through Credible does not affect your credit score, or require that you share your personal information with lenders at this stage of the process.
Do your research
Refinancing student loan debt with a private lender is not for everyone. If you refinance government loans with a private lender, you’ll lose access to programs like income-driven repayment, and the chance to qualify for loan forgiveness after 10, 20, or 25 years of payments.
While some private lenders will grant deferment or forbearance to borrowers facing financial difficulties, government student loans can be more lenient in that respect.
Enrolling in a government-sponsored income-driven repayment program like REPAYE can lower your monthly payments by extending your loan term to up to 25 years. Borrowers can also extend their repayment terms by consolidating student loan debt and enrolling in a standard or graduated repayment plan. But extending your loan term in a government repayment program does not provide an interest rate reduction, and can increase total interest and principal payments.
The student loan refinancing outcomes presented here are based on refinancings by multiple lenders initiated through the Credible marketplace from December 12, 2013 to December 13, 2017.
Savings were calculated by subtracting the projected lifetime cost of each borrower’s student loans after refinancing from the projected total cost of their original student loans.
Some borrowers refinancing through the Credible marketplace choose variable-rate loans that can rise and fall with benchmark interest rates. Our analysis does not attempt to predict how rates on these loans could change over time. The calculations also assume that users will make payments on-time and that there will be no prepayments.
We excluded a few anomalous cases in which borrowers may have provided erroneous information about their existing loans. For borrowers who reported a remaining term of more than 25 years on their existing loans, savings values are calculated based on 25 years worth of payments.
Borrowers enrolled in income-driven repayment plans like REPAYE qualify for loan forgiveness after they have made regular payments for 20 or 25 years. The amount forgiven is considered taxable income by the IRS. Public service loan forgiveness programs for teachers, government employees, and tax-exempt nonprofits, provide tax-free relief after 10 years of payments. We did not factor the potential for loan forgiveness into our savings calculations.
Credible is a multi-lender marketplace that allows borrowers to request personalized rates in real time without affecting their credit scores.