Financial savvy people: Is this a good idea?

This is in regards to student loans.

I borrowed ~$65k at around 3.5% variable APR for 10 years. I paid around $600/mo at the beginning which was manageable.

The APR has been fluctuating, and now, three years later, it's at around 8%, with about $50k left. I am paying around $800/mo now... this is too much (but still manageable; I have to be extra frugal), and this whole variable crap sucks.

So I am looking to refinance. I found another loan company. They are willing to give me the ~$50k loan at fixed 5.125% over 15 years. This is just under $400/mo.

So this means for the $50k that I have left:
Option [A] - Assuming it stays stable, I pay $800/mo * 7 years * 12 months/year = $67,200
Option [B] - Refinance, I pay $400/mo * 15 years * 12 months/year = $72,000

Even though Option [B] means (I) I'll end up paying more in total and (II) it'll be for more than double the time left (7 years vs. 15 years), I feel like saving $400/mo will be much worth it.

.....................what does CE think?

What else would you spend that extra $400 a month on? If it's not necessities, then stay with Option A

Damn_Underscore posted...

What else would you spend that extra $400 a month on? If it's not necessities, then stay with Option A

Probably save it. I feel like [B] is better because I can choose to pay extra and slash the years down (for example, if I pay $500/mo instead of $400/mo, I'll pay off the loan in around 10 years). In addition, [A] means that it's uncertain; the APR % may go up even higher.

Go with option B but pay $600-800/mo if you can. The sooner you can pay off the loan the better. You don't know what your situation might be in the future. 5k more in interest isn't too bad over 8 years but it's still 5k you can use towards something else.

bump

Option A. Only 'cuz you have $50k left in loans.

If you had like $5k left I'd say refinance and pay more and longer. But for $50k...I mean just leave it alone.

My advice to anyone with debt is to pay it off as quickly as possible within your means, but if you're struggling just to survive then you might consider it. If you do that then I would suggest you use some of the money you aren't spending on it to set up an emergency fund so that you don't get even farther behind because of unexpected medical/mechanical bills

Cleo_II posted...

Go with option B but pay $600-800/mo if you can. The sooner you can pay off the loan the better. You don't know what your situation might be in the future. 5k more in interest isn't too bad over 8 years but it's still 5k you can use towards something else.

I like this option. Allows you to pay it off as quick as necessary without being a guaranteed drain on your wallet. Definitely put more money in, though, to reduce the extra interest.