There is an estimated $1.2 trillion worth of outstanding student loan debt in the United States, but for certain borrowers, the problem of over-borrowing and letting interest rates sink students further into debt is becoming a thing of the past.
Student loan refinancing has quickly become a popular tool in slowing the ever-growing population of individuals buried in student loan debt. In recent years we’ve seen a rise in the need for student loan refinancing companies and the benefits have become more commonly known to borrowers.
We may see this industry begin to contract as some competitors succeed and others do not, but this will create a focused group of businesses that are well versed in this area of expertise and who offer better rates, better technology and an overall better experience for borrowers. In fact, we’ll see the market evolve in a number of key ways in 2016 and beyond:
Borrowers will overwhelmingly choose fixed rates.
Many believe the recent interest rate increase from the Federal Reserve wasn’t the last. In light of potential interest rate instability looming in our future, the risk of choosing a variable rate has become too high and borrowers are less willing to gamble with their interest rates. More and more borrowers will choose fixed interest rates for their student loan refinancings to avoid any fluctuations.
The taboo of talking about your debt will dissipate.
Graduating with student loan debt is becoming the norm, and as a result, talking about debt is becoming less taboo among the general population. Moving forward borrowers will speak to private lenders with less hesitancy and schools will promote of the idea of refinancing. Many colleges and university currently offer refinancing as part of their exit programs and this is a trend that will continue and become more popular as we enter 2016. The benefits of refinancing are clear and it is quickly becoming a standard component of exit programs.
Student loan forgiveness programs will become less forgiving.
We may see student loan forgiveness programs evolve in the coming year or years, potentially becoming less inclusive. Where formerly, income may not have affected a person’s eligibility, it seems likely that the federal government will consider imposing more rigid requirements. Borrowers with exceptionally high incomes may be deemed not to “need” loan forgiveness, regardless of whether they work in the public sector. If that happens, refinancing through private lenders will still be an option for those borrowers, helping to alleviate their debt burden over time.
Providers will exploit technology benefits and new lending frontiers.
Technology will continue to improve in the coming months and years as new solutions are created to simplify the application and servicing processes, to make them fast and painless for borrowers. Online lending has already gained a lot of speed this year and that momentum will continue. We may see companies begin to offer loans to international borrowers educated in the U.S. This is a new frontier for lenders as there are complications related to payback if borrowers return to their home countries, but the business possibilities are enticing and it seems likely that lenders will begin to crack this code in the near future.
Overall, the student loan refinancing industry will grow impressively in 2016 with the emergence of new technology and focus areas. These new advances will lead to great opportunities for borrowers and the benefits of refinancing will do nothing but improve.