Dear Student Loan Hero,
I’m looking into consolidating and refinancing my student loans, but I want to lower my monthly payments over the long haul. Do you know of any private student loan consolidation services that offer a repayment term longer than 20 years?
Dear Student Loan Borrower,
As you probably already know, most student loan refinancing companies — including the banks and online lenders that we rate most highly — offer repayment terms spanning five to 20 years, but no longer than that.
That’s not to say you couldn’t find an even longer term elsewhere.
You might start your search with the banks or credit unions in your backyard. Even if they don’t tailor a consolidation loan to your situation, they might offer a term longer than 20 years.
It’s even easier to research loan terms for online-only student loan refinance companies, but they may be unlikely to break from their stated range. Major online lender Earnest, for example, allows you to choose any term between five and 20 years, but won’t go longer.
After an exhaustive search, we did manage to find an over-20 term: Online lender U-fi offers a 25-year option for borrowers who are refinancing at least $25,000 and choose a variable rate.
If you have federal loans, you could also consolidate them and switch to an income-driven repayment (IDR) plan that spans 20 or 25 years. Keep in mind, though, that only federal loans are eligible for IDR — so you’d have to handle your private loan debt (if any) elsewhere.
Now that you know it’s possible to find a longer-than-20-year term, it might be worth considering whether it’s the right length for your repayment.
By choosing a longer loan term, you’re committing to pay out more interest over time. A $30,000 consolidated loan with a 6.00% fixed rate, for example, would rack up $15,568 in interest when it’s repaid over 15 years. The same loan paid back over 25 years would accumulate $27,987 of interest.
On the other hand, you might be willing to fork over that extra money (almost $12,500 in the case above) if it gives you the lower monthly payment you desire, plus a decade’s worth of breathing room in your budget. And if you’re able to get some of that debt forgiven at the end of the 25 years — which could be the case with an IDR plan — then it might make financial sense to go long.
A slower repayment plan might even allow you to hold on to more of your paycheck. This could allow you to dedicate what’s left over to other financial goals, like building an emergency fund or contributing to your employer-provided 401(k).
If you picked a variable rate over a fixed rate with a lender like U-fi, however, you’d run the risk of harming, not helping, your finances. Over a quarter-century, your rate could rise, depending on economic factors, significantly increasing the cost of your loan — though there’s also the possibility rates could stay around their current range or even go lower.
Choosing a shorter term, if at all possible, would save you money and get you out of debt faster. So before zeroing in on that 25-year term, double-check the affordability of a shorter — and more cost-effective — term. Our monthly payment calculator will make sense of the math.
Good luck in life and repayment,
Student Loan Hero
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