New study analyzes student loan refinancing process
According to a new study, student loan debt in the United States is continually on the rise. Currently, students leave college with an average of $29,000 in student loan debt. Even more disturbing is the fact that approximately 44 million people in the U.S. are currently trying to repay student loan debt. The massive student loan debt problem is having a tremendous impact on both the personal and financial lives of borrowers.
LendEDU's first State of Student Loan Refinancing Report was conducted after it was determined that there is not a lot of solid public data available to consumers regarding the process for private student loan refinancing. Their latest report is based on data collected from more than 20,000 applicants over the past year.
Their report found that the average approved applicant seeking private student loan refinancing has a FICO credit score of 750. At the low end of the scale, applicants can still be approved if they have a FICO score of 560.
One of the more common questions in relation to private student loan refinancing is the proportion of applicants who are denied refinancing. According to the report, 43 percent of applicants are denied their request for student loan refinancing. The report also found that approximately 33.36 percent of approved applicants continue through the process to complete refinancing of their student loans. Once an applicant is approved, the average length of time for the refinancing process to be completed is 28 days. This is from the time the applicant is actually approved until the loan is fully funded.
Another interesting question to take into consideration when evaluating the landscape of student loan refinancing is the average interest rate that borrowers receive after they refinance their student loan debt. The report found that the average interest rate for refinanced loan is 4.82 percent. This rate does include ACH auto-pay discounts, which are offered by many refinance companies to encourage borrowers to sign up for their payments to be made automatically.
On average, borrowers refinance $53,892 in student loan debt. The average term length for refinancing student loan debt is 10.4 years.
It’s also interesting to note that many applicants do need a co-signer when refinancing their student loans. In fact, the report found that 32.24 percent of privately refinanced student loans have a co-signer. Whether or not a loan has a co-signer or not does appear to make a difference in terms of interest rates offered for loans. For instance, the study found that cosigned loans have 0.15 percent lower interest rates than non-cosigned loans, on average.
Certain states in the country appear to refinance student loans than do other states. The states in which refinancing appears to be most popular include New York, California, Pennsylvania, New Jersey, Illinois, and Massachusetts.
The subject of student loan refinancing is one that has gained tremendous traction in the last year, particularly during the most recent presidential election. Now that President Trump has taken office, the discussion of the nation’s student loan debt has continued. In Virginia, a bill has been recently proposed that would create a Student Loan Refinancing Authority for the purpose of assisting borrowers with refinancing at lower rates. Under the proposed bill, current students and borrowers would be offered an opportunity to refinance their student loans. Those loans would be funded through the sale of tax-free municipal bonds. Similar programs are already available in North Dakota, Rhode Island, and Connecticut.
A recent report found that approximately half of survey respondents would like to see a federal student loan forgiveness program after 15 years implemented. Currently, student loan forgiveness is only available through a limited number of programs. Those borrowers who are on an income-driven repayment plan can opt to have their debt forgiven after paying on the loans for 20 to 25 years, based on the specific program. Not all borrowers are able to qualify for such loan forgiveness programs, however.
In addition to the creation of a national student loan forgiveness program, approximately 30 percent of people would also like to see a federal program for refinancing student loans. Currently, only federal student loans can be consolidated through the Department of Education. While federal student loans can be consolidated, they cannot be refinanced for a lower interest rate. Student loans can be refinanced through a private lender, but there are potential drawbacks to consider, including the fact that if a borrower refinances with a private lender, he or she will have to give up the option to participate in an income-driven repayment program or the Public Service Loan Forgiveness program.