You've watched your children or relatives celebrate college graduation, move to new cities and start first jobs. You might be settling into life with an empty nest, or simply enjoying one less person in the house.
That is, until your child brings up student loan refinancing and asks if you will help by co-signing.
Student loan debt in the United States has climbed to more than $1.48 trillion, a record amount. The average student loan debt for the class of 2017 was nearly $40,000, according to Student Loan Hero, an online resource for managing student and personal debt. This represents a huge financial burden for 44.2 million Americans and can take years to pay off.
Currently, interest rates on private student loans range from about 3 percent to about 12 percent, depending on the type of loan and the lender. Interest rates on federal loans increased this year and are between 5.05 percent and 7.6 percent for the 2018-19 school year, according to the office of Federal Student Aid. The top picks for student loan refinancing from Student Loan Hero offer interest rates between 2 percent and 9 percent.
For some, refinancing a student loan with a lower interest rate can be a great way to save money and finish paying off debt faster. Those who are steadily employed, usually in professional careers, are able to apply and be approved on their own. For others, most refinancing lenders will allow co-signers to help applicants.
“Generally, refinancing your student loans is just the first step on the journey out of student debt,” said Anna Khayet, director of product marketing, student loans at SoFi, an online personal finance company.