Student Loan Debt: Worse for Women, But Here’s One Way to Deal
SPONSORED POST – The overall gender wage gap may have narrowed over the past decade, but for MBA grads it has actually grown wider. Research shows that female graduates of top U.S. business schools earn an average starting salary that’s 7.3% less than their male counterparts – that’s up from a 2.2% difference ten years ago.
To make matters worse, if you’re one of the many women shouldering tens of thousands of dollars in graduate student loans, this pay inequity puts you on worse footing than a male MBA with the same amount of debt. A recent study by the AAUW confirmed that, because women are generally paid less than men, student loan repayment eats up a greater portion of their earnings. It can take longer to pay off loans, cause more financial strain and delay investment in important things like retirement savings and buying a home.
But while it might not be in your power to single-handedly close the gender pay gap, there is a way to potentially ease your student debt burden. If you qualify to refinance your student loans at a lower interest rate, you may be able to make lower monthly payments, pay off your loans faster and take a big bite out of your total balance.
Want to know if refinancing is right for you? Here are three questions that can help you decide:
1. Do your current student loans have high interest rates?
The first thing you should look at is the interest rate that you’re paying on your current student loans, particularly unsubsidized Direct, Graduate PLUS and private loans. These loans tend to be higher interest than subsidized federal loans, and you may be able to find a lower interest rate private loan option.
2. Has your financial situation improved since you took out the loans?
You were likely a starving student when you first applied for your loans, but ideally your financial situation has improved with time. This is great news for your bottom line, because a higher credit score and income level are key to helping you qualify for a lower interest rate.
And if you expect to stay on an upward financial trajectory, you might even consider refinancing with a variable rate student loan. Variable rate loans typically offer lower interest rates than fixed rate loans (for example, SoFi’s variable rate loan offers rates as low as 2.92% APR with AutoPay). However, the rate is tied to prevailing interest rates, which are very low today but should go up over time. The upshot is that these loans are usually best suited for qualified borrowers who intend to pay off their loans at a relatively fast pace.
3. Do your federal loans have benefits that apply to your situation?
One common misconception is that you shouldn’t refinance federal student loans, since some of these loans offer benefits and protections that don’t transfer over to a private lender. But this is an overgeneralization, since these benefits don’t apply to every borrower or even every loan.
For example, the government offers a range of forgiveness programs for borrowers pursuing careers in teaching, the military and the public sector. If you fall into one of these categories, you’ll want to read the fine print on your federal loans to see if you qualify for any of these benefits before you consider refinancing.
Some federal loans also offer hardship-based protections like forbearance, deferment and the ability to make lower payments over an extended period of time. These can be good options for borrowers who have low or unpredictable income, but if you don’t fall into that category, these benefits won’t do you any good.
It’s important to note that some private loans also offer benefits and protections for borrowers who experience an unexpected change in financial situation. At SoFi, for example, we may be able to offer certain hardship programs including adjusted monthly payments and/or forbearance for a specified period of time. And if you lose your job, we’ll help you find a new one.
Now that you’ve answered these questions, you should better understand whether you’re a good candidate for student loan refinancing. The next step is to do a little research – check out several private loan providers to compare interest rates and other features.
SoFi, for example, offers competitive interest rates as well as a community benefit, which helps our borrowers find great jobs, have successful careers and build the networks they need in order to achieve their personal and professional goals. Which means you may gain more than cost savings when you refinance your student loans.
 SoFi average borrower savings assumes 10-year student loan refinancing with a weighted average rate of 7.67% and a loan balance of $86,000, compared to SoFi’s median 10-year rate of 5.875% (with AutoPay).