Homeowners wouldn’t think twice about refinancing their mortgage into a lower interest rate loan, nor would unsecured debt holders when it comes to consolidating their debt so they pay and owe less. But when it comes to student loans, millennials are actually balking at refinancing their debt, even if it will save them money each month.
According to a new survey conducted from June 30 to July 3 by Google Consumer Surveys for Student Loan Hero, 62 percent of student loan borrowers surveyed said they are familiar with refinancing their student loans, while 69 percent said they have never refinanced. What’s more, nearly 38 percent said they had no idea they could refinance their student loans to begin with.
“With the average cost of college rising at a rapid pace, so are the student loan balances of graduating seniors,” said Student Loan Hero in a blog post showcasing the survey results. “Yet, one of the most effective ways of reducing student loan payments — by consolidating multiple high-interest loans into a single, new loan with a lower rate — is unknown by a large portion of today’s borrowers.”
The ignorance on the part of student loan borrowers comes at time when the nation collectively owes more than $1 trillion in student loan debt. With many graduates coming out of school unemployed or underemployed, they are having a tough time paying their debt. That is resulting in millennials putting off purchasing homes, buying a car and getting married. While a refinance isn’t the Holy Grail, it could help borrowers reduce their monthly payments.
According to the survey, which polled 1,001 American student loan borrowers, around 23 percent of survey respondents say they haven’t refinanced their student loans because they weren’t aware they could, while about 8 percent say getting student loan forgiveness is the reason why they haven’t refinanced. Meanwhile, about 20 percent aren’t refinancing because of an income-driven repayment plan. Among those who have already refinanced, the survey found lowering the interest rate and monthly payment were the main reasons. Other reasons to refinance include releasing a cosignor from the loan, transferring a Parent PLUS loan to the student and converting a variable rate loan to a fixed one.