SHOULD I REFINANCE MY STUDENT LOANS?

The answer is NO if:

• You qualify for loan forgiveness and plan to use it. Just know that forgiveness of the student loans does not mean forgiveness from the IRS. You still have to pay tax on forgiven loans unless you are a public service worker, federal government employee, teachers, and other qualified professionals. This is VERY important because I have too many clients who think that just because they’re on a qualified forgiveness loan that they don’t have to worry about taxes later. Well, surprise, that loan that might grow to become $200K later after 10 or 20 years is equivalent to you receiving an additional $200K of salary. You might have gotten away with not paying the loan but you still have to pay the taxes.
• You don’t have a good credit score to refinance, so you might not get a better interest rate than what you already have now. This is another reason why having a great credit score is important.
• You need an income-driven repayment (IBR) plan. If you don't know how your financial situation will be in the coming years. And you might not be able to afford to pay, having these plans make affording your monthly student loan payment easier on your budget every month. Just know, again, that unless you are working in a qualified field, your forgiven loans will be taxable. You can pay a small amount per month based on your income. But know that just making that bare minimum payment required based on your IBR plan will not make your loan go away. And if your loan is forgiven, you still have to pay taxes later unless you work in a qualifying field.

Consider refinancing IF:
​

• You want to lower your interest rates. If you have a great credit score, you can get better interest rates than all your student loans combined. Just google student loan consolidation and get quotes, make sure you don't give your social security number away or run your credit.
• You want to simplify your loans. It’s common to have several small loans. But this just makes it hard to track. Having one consolidated loan with a lower interest rate could help you better manage your budget.
• You want to pay off your loans faster. That several small loans you have, how long do you think you can pay it off by itself if you don't strategize, consolidate and refinance it?
• You have a good financial situation. Meaning you have a stable source of income and good credit.

If you need help with strategizing on ways to get out of your student loans faster. Schedule a complimentary chat to talk more about it.
​

About the author: Christine Teh is a personal finance money coach who helps people attain financial freedom and transform their relationship with money to create lasting changes. You can learn more about her by checking her website www.TehFinancialCoaching.com. She is currently accepting new clients. If you are interested in a chat, you can schedule a complimentary call.