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Refinancing to pay off or pay down student debt just got easier

June 9, 2017 | By Laura Haverty

Americans are more burdened by student loan debt than ever. The average graduate last year had $37,172 in student loan debt, up six percent from 2015. And although we may think student debt unduly burdens young adults, older borrowers are at risk too. The number of older Americans taking on student debt on behalf of their children and grandchildren has quadrupled in the past decade, with consumers over 60 now holding $66.7 billion in student loan debt, according to the Consumer Financial Protection Bureau.

At the same time, homeownership rates are at their lowest level in at least 20 years due, in part, to millennials who have the lowest ownership rate of their age group in history. Millennials are delaying life choices like marriage and parenthood, which are the primary drivers of homeownership.

Recognizing the relationship between student loan debt and homeownership rates, Fannie Mae introduced the Student Loan Cash-out Refinance in 2016 to help homeowners with at least 20% equity pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate. This program is now available to mortgage lenders nationwide. “We understand the significant role that a monthly student loan payment plays in a potential homebuyer’s consideration to take on a mortgage, and we want to be a part of the solution,” says Jonathan Lawless, Fannie Mae’s Vice President of Customer Solutions.

Homeowners who have student debt or have cosigned for student debt can use the Student Loan Cash-out to refinance their mortgages at a lower rate than what’s typically available and use the proceeds to pay off the balance of existing student debt. At least one student loan must be paid off through the payout and paid directly to the student loan servicer.

With interest rates still near historic lows, this refinancing option could help an estimated 8.5 million U.S. households pay down or completely pay off student debt obligations. To find out if a Student Loan Payoff Refi is right for you, try out our refinance calculator or contact your mortgage lender.

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