4 Reasons to Refinance Your Student Loans Now

The stress of paying back student loans is real.

The US has amassed a whopping $1.45 trillion in student debt and that number continues to rise as students are forced to put other major milestones on hold. Making sizeable monthly student loan payments – with interest that continues to build – may be preventing you from achieving your post-education goals. Weddings, home purchases, and travel plans are dramatically delayed for an alarming number of graduate school and college grads.

In a recent look at the day-to-day impact of student loan debt, Citizens Bank discovered that half or more of former students indicate that student loan debt has limited their spending in the following categories:

Source: Informed Index: An online research study conducted by Ipsos Research on behalf of Citizens Bank, August 2014.

This research concluded that while education is still seen as a good investment as it enables career goals, it may also hinder life goals.

But there may be a way to find more breathing room between these career and life goals (and in your budget) — refinancing.

Getting a better rate or repayment term could provide the financial relief needed to make your financial goals a reality. Here are four ways that our customers have used the extra cash they added to their monthly budget by refinancing their student loans. Imagine if you could add even an extra $100 or so to your monthly budget. Here’s what you could do:

1. Upgrade your car

Do you have an older car with more rust than shine and are you itching to upgrade? By refinancing, the extra room in your budget could be used toward a car with payment, whether you finance or lease, so you can cruise in style.

2. Put down a more substantial payment for a house

You don’t want to rent forever, right? Saving for a higher down payment on a house is a challenging task, especially for those managing large student loan payments every month. Refinancing could jumpstart your savings or help you set aside more than you were previously. Those funds could either be put into a certificate of deposit (CD) or money market to capitalize on higher yields than typical savings accounts.

3. Plan for retirement

You probably know the importance of saving for retirement, but how can you think of the future when you’re struggling with cash flow here and now? It’s critical that you start planning for retirement early so you can take advantage of the longer investment window and compound interest.

The money you save by refinancing could be used as a monthly contribution to a retirement account. Check with your employer to see if they offer a 401(k) and if they match any contributions, which is essentially free money. If your employer doesn’t offer a 401(k) or similar plan, you could save on your own with an Individual Retirement Account (IRA).

Or, you could use those savings to open your own investment account such as a robo-advisor that delivers automated and intelligent investing. These have lower account minimums than a traditional financial consultant or planner, so you can start making investments earlier. It’s important to remember that those funds are exposed to risk and do not have the potential tax breaks or matching contributions found in 401(k)s or IRAs.

4. Save for your child's education

How fitting would it be to use the extra funds from refinancing your student loans to help send your child to college one day? You could reroute your monthly savings to a 529 account so you can afford to send your child to their dream school so they can chase their dreams in the same way you have.

The bottom line

Refinancing your student loans could provide the necessary breathing room in your budget to set a path toward reaching your financial goals. It could open up a new set of possibilities when it comes to saving, whether for the short- or long-term, and give you peace of mind that you’re making the most of your money. What would you do with an extra $100 a month?

Ready to take the next step

What if you could save thousands of dollars each year by refinancing your student loans? It’s possible with the Citizens Education Refinance Loan. You can get a personalized rate in less than two minutes.