A Guide to Managing Your Student Loan Debt

In 2023, the average federal student loan debt balance is $37,338 while the total average balance (including private loan debt) is estimated to be as high as $40,114.

That’s a lot of debt to manage, on top of juggling a promising career and other life responsibilities. Plus, most federal student loans charge the same interest rate, regardless of how creditworthy you are. So, chances are, you’re probably paying too much in interest on your loans.

This is where refinancing comes in. Student loan refinancing is an opportunity to obtain a new loan at a lower interest rate and with different repayment terms. Review these tips for managing student loan debt:

1. Refinancing federal student loans

When considering whether or not to refinance your student loans, first decide if you’d like to keep your federal loans or refinance them to private loans. Federal loans come with a variety of protections and benefits, including the ability to defer payments or request forbearance when you are experiencing financial hardship. They also allow many borrowers to adjust payments based on income and some borrowers can have their federal loans forgiven in certain circumstances. You can find out more about these programs on the Federal Student Aid website.

2. Private student loan refinancing

There are several key factors to consider when deciding to refinance a student loan. If you have private loans, take the time to review the fine print to ensure you’re up to date on your responsibilities and agreements before making any changes.

3. Deciding on a student loan repayment option

The most important factors to consider in private loan refinancing are: Interest rate, repayment term (length of the loan), and type of loan (fixed rate or variable rate).

All of these factors will impact how much you could save by refinancing and how much you have to pay each month. All things being equal, you want your interest rate to be as low as possible. However, the lowest rates are typically only available for the shorter repayment terms, and shorter repayment terms lead to higher monthly payments, since you are paying your loan back over a shorter period of time. As such, you will sometimes need to balance lower rates with shorter terms and higher monthly payments.

4. Decide between fixed or variable interest rates

After you decide on a term, the other major factor is whether a loan is fixed or variable.

Fixed rates

While a fixed rate stays constant over the life of a loan, the variable rate option offers lower initial rates. However, these rates can fluctuate as interest rates change, which is hard to predict.

Variable rates

Variable rate loans may be good for people who believe they will make enough money in the future to cover potentially higher payments if rates go up, but may not be good for people whose future income is unpredictable.

5. Select a student loan repayment option

While student loan borrowers may have a plethora of repayment options – from income-driven repayment (IDR) plans to Public Service Loan Forgiveness (PSLF) for federal student loans to refinancing and more – wading through these options may seem tedious and overwhelming, especially if you are navigating school or your career. But, with some research you may be able to identify the best plan for you and get a better handle on managing student loan debt.

6. Tap into repayment support resources

Fortunately, there are resources available to help you understand all of your repayment options and choose a path that allows you to best reduce the cost of your debt. You can also schedule a free 30-minute consultation with one of our student loan specialists at GradFin¹ who can help you understand and how to qualify for different student loan repayment programs, including IDR and PSLF.

If you do decide on refinancing as a better way to manage student loans, Laurel Road offers a completely free and easy online application process to get your preliminary interest rates in minutes. Plus, there is no obligation to accept, and no origination fees or prepayment penalties. Apply now to get preliminary rates in minutes.

Regardless of whether refinancing is your best road forward, it’s important to educate yourself on all repayment options to make an informed decision. There is potential to save thousands of dollars, so it’s important to do homework and research all lenders when making a decision.