Early Retirement Extreme Forums

Hi everybody,
I have a student loan question. I currently am paying down 2 MOHELA managed federal Direct Student loans totaling about $16,000 and wondering if I might save a few bucks on interest if I privatized the 2 loans. Here is some background on my situation. I’m paying 5.75% interest on the loan. I make $88,000 but live in a high-cost area, have regular medical bills for myself, a spendy/impulsive wife, and 2 young kids. I’m working on contract and racing the clock to pay down the loan before my contract expires in 2020. I should have the loans paid off a couple months before the contract expires.

I’m wondering if I might save a few bucks on interest if I privatized the 2 loans. However, I’m wary of losing forbearance and similar borrower rights if my contract ends early. What do people think? Should I convert the loans?

Any idea what kind of interest rate you'd get?

Well, I haven't looked yet. I won't do it if the rate isn't at least 1.5% less and can't be done without points or fees.

A quick visit to SoFi shows their best possible rate is 2.47% APR on a variable-rate loan, a rough estimate is that you could save up to $500/year with $16,000 outstanding.

In your situation, I would just commit to saving at least 20% for the year and paying off the loans in full which is like getting a guaranteed 5.75% return. Don’t think the refinancing decision warrants much thought as it’s not going to significantly move the needle on your financial situation given the low outstanding balance.

I agree with @fish. The savings will be small potatoes overall.

If your time is a limited resource and this refi process with research takes 5 hours. I would venture to guess, at your spending level, you could figure out a way to save $1000 a year, forever, from your annual spend with that time. Even if unsuccessful in cutting that 1K, at least considering your time from this prospective in the future may help to change your thought processes. Of course, I could be way off on that, I don't know your situation well.

To mix in some practical help with my philosophical soapbox, if you still want to pursue the refi, MMM has an affiliate link with Sofi for a $300 bonus.
https://www.sofi.com/sofi-refi-300/?refer=10-995

I'd be hesitant to convert the loans because of the chatter about student loan forgiveness. If they ever come up with some kind of offer to forgive student loans, I'd assume those guaranteed loans would be the first ones eligible.