When to refinance? (Part I)

I had hoped to procrastinate put off refinancing considerations until at least December but the time has come…

Just prior to the start of this blog, I tried to refinance all of my private, non-federal student loan debt. At the time, my student loans were in the $120Ks and I was turned down because my debt-to-income (DTI) ratio was too high. After licking my wounds and snacking through my disappointment, I went on to reduce my student loan debt by $30,000.00 over two years. While some of this success can be attributed to frugal living and hustling, the interest rate forbearance on federal student loans, due to the ongoing COVID-19 pandemic, played a significant role. $75,441.87 of my remaining student loan debt is in federal student loans and prior to the interest rate forbearance my loans gain $400.00 each month in interest.

As the Department of Education, and President Biden, have stated that there will be no additional extensions of the interest and payment forbearances, I have been going back and forth as to when I should again try to refinance my student loans. Up until last evening, I was thinking about January 2022. The last day of the federal interest and payment forbearance is January 31st. Waiting until January would allow me to take advantage of the remaining interest and payment abatement and give me enough time to pay off Private Student Loan 4 (PSL4); my student loan balance would also be under $90,000.00 which would be a much improved DTI ratio. However, while scrolling through articles last evening, I came across “Another student-loan company is shutting down its services, bringing total number of borrowers in limbo to nearly 10 million.” In this article I learned that both PHEAA, who manages the servicing of PSL4 through the American Education Service payment platform, and Granite State Management and Resources (GSMR), who is the servicer for ALL of my federal student loans, will not be renewing their service contracts with the federal government once they expire at the end of December. Yeah.

At first, I didn’t know how much this would change my plans. I planned to have PSL4 paid off in December so if I stuck to that goal, PHEAA bowing out wouldn’t affect me a great deal. However, GSMR not renewing it’s contract is a much bigger deal. GSMR has actually be a great student loan servicers and I have never had any of the problems that other folks have complained about with other servicers. Additionally, unlike the ECSI Heartland payment platform that is used to service my university student loans, the GSMR payment platform is really great and allows you to find all of the detailed information about your student loans that I love to obsess over and easily allocate targeted payments. However, beyond the inconvenience of losing a great servicer, I am most concerned about the possibility that my federal student loans, all 12 of them, might not end up with the same student loan servicer; I know this is a possibility because it was the case prior to my student loans all being serviced by GSMR. Not only was it incredibly annoying but it made a mess of my credit report as existing student loan lines were marked paid/closed and new ones were opened. Yeah.

I think I should
refinance. And if I refinance, I think I should refinance in December. I know what you are thinking: why the general uncertainty? Well, as soon as I refinance, I lose the benefit of the 0% interest rate on my federal student loans. And at $400.00/month, that adds up quite fast. Additionally, as the possibility of me returning to school full time in the near future is still a possibility, I also need to think carefully about giving up some of the benefits of federal student loans. One of those benefits is the graduated income repayment plan. While I had no interest in the long term benefits of the plan (such as loan forgiveness after years of program payments), I was heavily benefiting from the fact that I had no payment due while my income is so “low,” which has allowed me to allocate all of my additional income towards paying off my more expensive/precarious student loan debt. Once I refinance, I give up that benefit which means that in as little as 30 days from the date of refinance, I will have to begin making payments which could greatly impact my ability to pay off PSL4 and PSL2, both of which I had hoped to pay off prior to refinancing my federal and university loans.

Yeah…so much to consider. At the moment, I am leaning towards refinancing my student loans on December 1st. And maybe evening lumping in PSL2 with my federal and university student loans so that in January 2022 I am just making one payment.


4 thoughts on “When to refinance? (Part I)

  1. Oh man, this is another really hard question. Two in one day! If it weren’t for the possibility of the 12 loans being farmed out different places, I would say you shouldn’t refinance yet. But the possibility that you’d have to deal with multiple servicers is really tough and makes me lean towards you starting the process in December. I will say, on the refinancing front, that if you go with someone like Sofi, they let you re-refinance every few months, so if you don’t start off with the greatest interest rate, you could theoretically bring it down over time. I know DDSW did a re-refinance at least once because of interest rates (I can’t remember if she did it with the same servicer or switched.)


    • Yea…I was goin’ through it.

      Yup, that’s exactly where I am at with this decision. Not wanting to refinance because…who knows…the real benefit of federal student loans is that there is usually always a way to defer them if you come into financial difficulty. With places like So-Fi, the deferment for in-school status is usually only 3 years so you need to use it wisely. I haven’t quite made a decision about this…I am giving myself until November 30th.


  2. I would be very very careful about giving up the benefits of federal loans. Not only does the income based and graduated plans allow you to have lower payments if needed, think about the future. No in school deferrment? What if you need a car? Even if you want to pay more than the lowered payment, the fact is your credit report minimum payment is what creditors use to determine what you can afford. The fact that my minimum was listed as so low got me into a mortgage- which became suddenly absolutely necessary as my current apartment building got bought by a slumlord and became impossible. If I’d had that full payment listed as the minimum, it wouldn’t have happened. I’m not sure I could have even been approved for another rental unit.

    Also… disability. God forbid, but if something happens the federal loans go away. Refinance and well.. I don’t think they legally have to care.


    • Paula, thank you so much for commenting. You have brought up excellent points. I promise I plan to address all of these in an upcoming post. I will likely just respond to your comment directly in my post as you do a great job of highlighting almost all of the salient issues…and why, outside of the interest and payment abatement due to COVID-19, I have taken so long to move forward with a refinance.


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