You don’t have to be an economics major to understand the financial burden student loan debt has placed on American students. According to, some 44 million people in the United States have student loans, accounting for $1.5 trillion in debt. What’s more, the average student loan debt for graduates of the Class of 2017 was $39,400 – a 6% increase from the previous year.

If you’re among the 44 million people with student loan debt, there may be a way to get some relief from high monthly payments – refinancing. With refinancing, you pay off existing federal and/or private student loan debt with a single loan from a private lender. There are some very good reasons to refinance, including:Hand arrange wood letters as student Loan word

  • Lowering the interest rate. Student loan rates vary by type (federal and private) and lender. Depending on the loan type and terms, you may be able to lower your interest rate by refinancing. A lower interest rate means lower monthly payments, which will free money in your budget. It also means you’ll pay less interest over the life of your loan.
  • Lowering the monthly payment. With a private loan, you may have the option to extend the repayment period over more years. This would allow you to lower your monthly payments, and free up some extra cash. Keep in mind, however, that extending the term will result in paying more interest over the life of the loan.
  • Converting a variable rate to a fixed rate. Some student loan rates are variable, which means they are subject to rate increases in a rising rate environment. By refinancing to a fixed-rate loan, you can lock in a fixed rate that offers predictable, fixed monthly payments for the term of your loan.
  • Releasing a co-signer. If your parents co-signed on your student loan, you can refinance to release them of their debt obligation and take a major step toward financial independence.
  • Consolidating multiple loans into one. You may have several loans with several different lenders. Refinancing would allow you to consolidate multiple loans into one loan with one monthly payment, saving you time.

When refinancing is a smart choice.
Refinancing doesn’t make sense for every student. In general, you should consider refinancing if you meet the following criteria:

  • You have good credit. In most cases, a lender will require you to have a credit score in the high 600s. Keep in mind that the better your credit, the lower the rate you will receive. If your credit is poor, refinancing may not make sense.
  • You have loans with high variable rates. With interest expected to continue rising, you may want to refinance your adjustable-rate mortgage into a fixed-rate mortgage to lock in a lower rate.
  • You’ll save money each month. You wouldn’t want to refinance for a rate that’s relatively the same.
  • You have good payment history. Lenders will review your credit report to see if you have a good payment history.

Another factor to keep in mind. Refinance loans are private loans. That means if you chose to pay off a federal loan, you will no longer be eligible for the benefits that come with federal loans, including repayment flexibility if you encounter financial hardship. You also would not be eligible for income driven repayment or government forgiveness programs.

Do your homework.
In short, before you make the decision to refinance, you’ll want to carefully review your current loans and the rates available to determine how much you can save. You’ll also want to take the time to find an experienced and trusted lender that can help you make the right decision for your situation.

While Main Street Bank does not offer student loans, we do offer alternatives, like home equity loans and lines of credit, that may be another way to consolidate debt. Talk to a Branch Manager or Community Lender to learn more.