More than 45 million Americans have borrowed $1.45 trillion in student loans to help pay for their post-secondary educations. Repaying those loans can be tough, especially if the loan amount is high and pay for the first job after graduation is low.
One option for recent graduates might be refinancing their student loans. This works much the same was a home mortgage, but there is no collateral requirement and qualifying for refinancing can be difficult.
Like all noncollateralized personal loans, interest rates are lowest for borrowers with the more income and high credit scores. Interest rates for the best credit risks begin below 3.5% and most lenders offer repayment periods that are longer than the terms of the original lender. Some even offer a cap on how high a variable interest rate can rise.
Student loan marketplace and refinancing website LendEDU has just released its second annual report on the state of the student loan refinancing market. Here are several highlights from the report:
Average credit score of an approved refinance applicant is 764. The 2017 score is seven points higher than in 2016.
Just over 58% of 2017 applications are denied. More Americans had their refinance applications denied in 2016 (43%) than were approved (42%) in 2017.
The average interest rate on a refinanced loan is 5.56%. The average rate rose 74 basis points year over year from 4.82% in 2016.
A third of approved loans required a co-signer. The percentage was roughly equal in both years. Co-signed loans offered a 0.54% lower interest rate than loans made without a co-signer, up from 0.15% in 2016.
The average size of a refinance loan was $66,453. The 2017 average was more than 23% higher year over year.
Average length of repayment period for a refinanced loan is 11.73 years. Compared with 2016, the repayment period rose by 1.3 years in 2017.
Less than half of approved applicants actually end up refinancing their loans. In 2016, just over 33% of all applicants completed the loan process. In 2017 that percentage rose to nearly 43%.
Visit the LendEDU website for more details and discussion.