I graduated law school with three loans: a Direct Grad Plus loan at 7.8%, a Stafford loan at 6.8%, and a loan directly from my law school at 8%. Each of these loans corresponded, very roughly, to a year of law school.
We’ve now killed the Direct Grad Plus loan. The Stafford loan is on life support. However, the loan from my law school is (alas) alive and well. And accruing interest daily on its $44,700 principal.
I’ve been considering refinancing this loan from my law school for a number of reasons. First, I’m paying an 8% interest rate on it. This is practically usurious in my opinion. Second, the loan is annoying to pay – the school sends me a bill through the mail each month, and I mail back a check. Third, there is no instant gratification of making a large loan payment. I can’t check the balance on-line, or hook it up to my Mint account.
I poked around, and have applied for a five-year variable rate loan from Sofi. This kind of refinance is clearly not for everyone – I am only considering it because (1) we intend to pay off the loan entirely in the next nine months; (2) I don’t expect LIBOR – which it is pegged to – to do anything crazy in that time period; and (3) if LIBOR did go crazy, the rate of the loan is capped at 10%, which is not too dissimilar from the 8% I am already paying.
After running the numbers, I’ll pay about $1,500 in interest at the current 8% interest rate over the next nine months on this loan. With a Sofi refinance, I’ll pay about $700. I’m still thinking about whether to take the plunge, but so far, it seems like an easy way to save about $800 with about two hours worth of work.
I asked Dog DebFreeJD her opinion about whether to refinance. She expressed her approval by asking for a belly rub.
Anytime, Dog DebtFreeJD.