“She doesn’t understand,” Decker said. “But my husband and I, we were just over the moon.”
Even with the help of scholarships, she had about $60,000 in loans.
“That was sort of like a turning moment for me,” Decker said. “I told myself I’m not going to do this for the next 25 years.”
After putting all the money she could toward her loans, Decker eventually brought her balance to just under $30,000.
“I was exhausted from trying to throw so much energy towards this problem,” she said.
By working with lender CommonBond in April 2016, she was able to reduce her interest dramatically.
While many lenders offered similar rates to refinance, CommonBond stood out because they also have a social mission. The company works to provide technology to schools in the developing world with every loan it funds.
CommonBond is just one of several companies that have emerged to help students reset the terms of their loans. Outstanding student loan debt has reached a record $1.5 trillion. As various lenders compete, there are some key things to keep in mind.
Beware the risks
Because federal loans offer debtors the ability to provide lower payments and more flexibility if they run into trouble making payments, it often does not make sense to refinance with a private lender, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a provider of free advice and help with dispute resolution for student loan debtors.
“Even if the borrower is in a position where they might be able to get a lower interest rate on their federal loans by refinancing into the private program, they have sort of lost their safety net,” Mayotte said.
You also want to make sure that you have a good financial history, including a solid credit score, a good debt-to-income ratio and a record of at least a couple of years of making your student loan payments on time. Otherwise, your interest rate could go up instead of down, Mayotte said.
Also be sure to do a thorough online background check on your lender, including what other debtors have said about them.
“The review process is your friend,” Mayotte said. “Keep in mind that this is debt, so there’s always going to be people who have their angry pants on.”
Red flags include a high volume of complaints or indications their customer service is poor.
Also search to see if there are significant lawsuits or Federal Trade Commission actions against them, Mayotte said.
Some of the private lenders who have emerged aim to create a unique experience to differentiate themselves.
At CommonBond, where you can refinance loans ranging from $5,000 to as much as $500,000, part of that experience includes a program for debtors who find themselves in economic hardship, according to co-founder and CEO David Klein.
The company also arranges for meetups and networking events.
Reducing your debts
If you are thinking of refinancing, you should make sure you will not need the forbearance or income-driven plans that federal loans offer. You also cannot participate in the Public Student Loan Forgiveness Program.
“On the Money” airs Saturdays on CNBC at 5:30 a.m. ET, or check listings for air times in local markets.
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