Refinancing an option for student loan debt

Student loans are a huge issue in Iowa and in the United States. According to the Institute for College Access and Success, the average Iowan graduate is now graduating with an astounding $29,370 in student loan debt. Furthermore, 69 percent of the class of 2015 graduated with some form of student loan debt. Iowa is among the worst in the nation when it comes to student loans. Iowa ranks 9th in terms of average debt and the proportion of graduates with student loans.

While there are many factors which have incubated the student loan epidemic, rising costs of higher education and easy access to financing are the two glaring causes to blame. As repayment begins for Iowa's class of 2015 many recent graduates are going to be looking for ways to beat their student loan debt. Iowa student loan borrowers should consider student loan refinance as a tool to pay off their student loan debt quicker with less interest.

Student loan refinance is a newish concept. Over the last few years, the student loan refinance market has become more mainstream with a number of new lenders getting into the game. If you aren't familiar with the concept, student loan refinance is the process of refinancing old private and federal student loans with a new private student loan lender.

Many graduates are stuck paying rates as high as 6.80 percent on their federal student loans and it gets even worse for private student loan borrowers. 16 percent of Iowa's student loan debt is private. Graduates holding private student loan debt might be paying interest rates as high as 12 percent! Refinancing rates start dramatically lower than new federal and private student loan rates.

Refinancing rates start around 1.90 percent and go up to 8 percent on the high end of the range. The majority of refinancing candidates fall somewhere in the middle around 3.5 percent to 5.5 percent. Saving 1 percent to 2 percent on student loan debt is possible for many graduates. If the average Iowan lowered their rate by 1 percent through refinancing, savings would total over $1,500!

When you refinance there are other benefits too. Refinancing gives the borrower the ability to select a new rate type and term length. Term lengths can range from 5, to 10, to 15, to 20, to 25 years. Variable, fixed, and mixed rates are available. Refinancing allows you to tailor your repayment to your financial objectives.

Not everyone will get approved for student loan refinance. Unlike the Department of Education, student loan refinance lenders use creditworthiness to determine eligibility. To qualify for student loan refinance you should have a credit score above 680, have a debt-to-income ratio below 40 percent, and be making at least $50,000 gross. However, having a cosigner can help you get approved if you don't meet these requirements on your own, or if you've just recently graduated.

Student loan refinance is a new market. Iowans should consider refinancing their student loan debt as a way to better manage their debt in the years ahead.

' Nate Matherson is a co-founder and CEO at LendEDU, a marketplace for student loans and the student loan refinance that was born out of the Iowa Startup Accelerator in Cedar Rapids. Comments: nate@lendedu.com