According to The Institute for College Access & Success, student loan debt affects over half of Florida’s college grads. As of the 2019/20 academic year, students in the state are graduating from college with an average debt of more than $24,000. Even though Florida has the eighth lowest student loan in the country, millions of Florida doctors are still struggling to pay off their debt. For some, the Sunshine State offers options for student loan forgiveness.
If you have a mortgage and student loan, you could consider consolidating them into your loan. You might be able to pay off your student loan payments and still have equity left over because property values have been increasing significantly over the previous five years. Knowing the benefits and drawbacks of student debt consolidation can help you decide whether it is the right course of action for you.
Can student debts be rolled into a mortgage?
With the appropriate financing and sufficient home equity, it is possible to refinance student debt into a mortgage. You can keep your home instead of selling it and refinance your student loans, which will make managing your finances easier and could even result in interest savings. In order to be authorized, you’ll need to show that you’re able to handle the higher debt payment that comes with consolidating debt with your mortgage.
Consolidating your student loan into a mortgage may raise your monthly payment. However, whether you transfer all of your debt towards your mortgage or maybe a portion of it, it may also eliminate (or reduce) your other debt obligations.
A cash-out refinance to combine mortgage and student debt or Fannie Mae’s Student Loan CashOut Refi program are two alternatives available to homeowners who wish to roll student loans into a mortgage.
In actuality, you aren’t paying off the debt all at once; rather, you are “reshuffling” it. The secret to combining student loans with mortgages is that it enables you to make the most of cheap mortgage refinancing rates while also simplifying your monthly budget.
The pros and cons of rolling your student loan into a mortgage
- Reduced monthly payment: You’ll save money over the course of the loan if the interest rate is lowered, but it may also result in a smaller monthly payment. Your budget could have more wiggle room, and you might even be able to make additional mortgage payments.
- Reduced chances of making late payments: Keeping track of too many monthly loan payments might be difficult. When you have too many tasks on your plate, it is easier to forget to make a payment or to budget improperly. Your chance of making late payments is decreased when you combine your student loans with a mortgage.
- Tax benefits: The interest you pay on your mortgage can be deductible in part or in full. Even while student loan interest isn’t typically tax deductible, you might be able to do so if you include it in the loan. It is crucial that you discuss your options with your tax advisor.
- Lower interest rate: If you have a strong credit history and few other delinquent obligations, you can qualify for a student loan interest rate that is lower than the one you now pay. You can save a lot of money over the course of a loan by negotiating a lower interest rate.
- Challenging to be eligible for: A low debt-to-income ratio and good minimum credit score are prerequisites for cash-out refinancing. Lenders have tougher measures to verify if you are eligible for the loan since they incur a bigger risk by lending you more money.
- You might lose your house: By including your student loans in your mortgage, you can secure loans that were previously unsecured. Since your property is the collateral for your mortgage, you risk losing it if you renege on the loan because the installments are higher.
- More interest: If you spread out the cost of your student loans over a longer period of time, they can still cost more even with a reduced interest rate.
- Loss of federal loan protections: If you have federal student loans, you could be eligible for alternate payment plans or loan protections that cut your payments or even cancel some or all of your debt. You forfeit that security if you refinance the loan into your mortgage.
Alternatives to student loan consolidation
Employer-sponsored loan help
Find out whether your workplace has any programs that help employees with their student debt payments. Some employer schemes make monthly payments for a certain period of time, then make a one-time contribution on a particular employment anniversary.
Depending on your circumstances, you could be eligible to have your student debts forgiven. If you work for a nonprofit or the government, or if you’ve taught in a low-income elementary or secondary school, or an educational assistance agency, there are programs that offer forgiveness.
Both the nurse and lawyer programs in Florida forgive some or all of the student loans of qualified applicants. To qualify, you must work full-time for a certain amount of time for a certain employer. Both programs offer aid for a number of years, despite the fact that none will completely wipe off your debt.
Loan Repayment Assistance Program (LRAP)
The LRAP is run by the Florida Bar Foundation. Each participant can get a loan of up to $5,000 each year. Once the money is used to pay down college debt, the loan is no longer needed. You are regarded as a participant as long as the job complies with the necessary requirements. Executive directors, people who are filling in as executive directors, and people whose main job is to do administrative work are not eligible. Attorneys who work for the government are likewise ineligible.
Refinancing student loans
You can decide to refinance your mortgage independently of your student debt. You can compare offers from many lenders at once on a variety of websites that compare student loan refinancing options. Depending on your credit rating and the loan period you choose, rates and terms will change.
Cash-out refinancing for student loans might seem quite alluring if you’re having trouble making your payments. After all, you may pay off all of your debt and perhaps even get your mortgage’s interest rate reduced. However, bear in mind that you are only rearranging your debt; your student loans are not going away. While having fewer payments each month might feel like a relief, it’s crucial to acknowledge that your financial situation isn’t getting any better.