Make sure you know your financial status before applying for a loan.
Many students have to look into student loans when they consider getting their master's degree. Whether they're looking to obtain a law degree or want to pursue psychology programs, advanced degrees aren't cheap. That's why many people take out student loans to help pay off their degree over the long term. Yet these loans gain interest over time, and burden people for years. Refinancing your loans can help you save money in the long run.
"Refinancing with master's degrees in education or teaching could save an average of $4,272."
The benefits of refinancing
Refinancing is a great option if you're looking to lower your interest rate and change your payment plan, and it could help you save a lot of money, according to a new study from NerdWallet. The study revealed that people with master's degrees in education or teaching could save an average of $4,272, and those with advanced degrees in fields like fine arts can save a total of $4,575. The study examined participants with a 10-year loan who chose to refinance after two years of regular payments.
While all advanced degrees come with a cost, some tend to be costlier than others. NerdWallet found that medical and law school graduates tend to be bogged down with the highest fees over time. However, because of these high bills, these students will probably save more in the long run.
Not everyone will qualify to refinance their student loans. Here's how to determine whether you should refinance.
1. You're financially stable
Most people say that getting a graduate degree will guarantee you better earnings than if you simply have a bachelor's degree. However, if those earnings aren't steady and substantial, you might not qualify for a refinancing plan. Naturally, if you have a full-time job rather than being a student or partially employed, bank lenders may feel more comfortable lending you the money you need with the belief that you will be able to pay them back. If you're not financially stable or aren't fully employed, you may have the option of having someone cosign your loan to improve your chances.
2. You've got a solid credit score
Your credit score is another thing most lenders and banks will check when you apply for a loan. Again, this is to ensure that you're good for the money and won't default on the loan. People with low credit scores often haven't paid a lot of bills or struggle to pay them on time. Check out your credit score before you apply for a loan. Usually lenders look for credit scores that are around 680 or higher. If it's lower than that, you might be denied the loan or you may not get as good of a plan.
3. You've got a few payments under your belt
Many refinance plans are not usually available for people until they've made regular payments for at least two years. That way, you can prove that your current plan isn't beyond your means but you're looking for a better loan option. Paying for this amount of time proves your credibility. You'll show lenders that you can pay your bills on time and in full without issue, which can help build their trust and raise your likelihood of getting a refinancing plan.
4. You've got a large amount of debt
Sometimes those who have a large amount of debt have a better chance of getting a refinanced loan. Of course, this doesn't mean that you're not paying your bills on time or are being chased by creditors. It simply means that you owe a significant amount of money toward student loans. So if you took out a substantial loan when you began graduate school, you'll probably be a good candidate for a refinanced loan.
By Monique Smith
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