There are many benefits to keeping your government loans even if they have higher interest rates. They allow you to defer payments, pay back your loans according to your income, or forgive the balance if you pass away. There have been a few startups and some existing banks that offer deferment if you get laid off and also provide lower interest rates that can save you money. This article is for those who have decided that they don’t need the protective benefits of government loans and want to really save on the amount of interest that they pay. I do not get paid to refer this company.
First Republic Bank is offering the best student loan rates that I have come across in my search to help clients. They range from 1.95% at 5 years to 3.75% at 15 years; both of these rates are FIXED. I personally prefer variable rates to fixed rates, but these fixed rates are so low that there isn’t much reward to take on the risk of a variable rate.
There are some pretty high requirements to get these loans but it is definitely worth it to apply. Some of the requirements like work experience and credit score are flexible and based on a matrix, but it seems that being located near a branch is required. You also have to open a checking account, direct deposit your paycheck into the account, set up auto pay for your loan, maintain a monthly average balance of $3,500, and set up online banking. If the monthly balance is not maintained there is a monthly fee of $25, but without direct deposit, online banking, auto pay, the rates jump by 5%. YES, 5% so if you do refinance make sure that you take care of the requirements!
The bank has branches on the West Coast in the San Francisco area, LA, San Diego, Santa Barbara, Palm Desert, Newport Beach, and Portland. On the East Coast it is located in Manhattan, Boston, Wellesley, Greenwich, and Palm Beach. I believe that you can do a portion of the application online, but you will have to finalize it inside of a branch.
What are the benefits of refinancing?
These are just estimates, but could be very close to what you could see. The best 10 year private rate is from DRB Bank as of 2/3/2016 and the best 15 year private rate is from Citizens Bank as of the same date. I retrieved both rates from their websites on that day.
These also don’t take into account what you would do with the monthly savings. If you were to invest the monthly savings and achieve a CAGR of 6%, you would have these balances at the end of your loan.
For the 10 year loan you would have an ending balance of about $38,256 vs the government loan and about $17,810 vs the private loan.
For the 15 year loan you would have an ending balance of about $54,863 vs the government loan and about $26,014 vs the private loan.
As you can see refinancing can provide a nice monetary benefit. Even if you don’t invest what you save, it still reduces your payments and allows you to do what you would like with the money.
Please talk to a financial advisor or tax professional before you make any changes to your current situation.
Thanks for your time,
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