I’m in the clergy and have made student loan payments ‘automatically, without fail’ for 15 years — yet I somehow still owe money. Now I want to retire. What should I do?

Question: I am in the clergy, which is supposed to be a qualifying position for student loan forgiveness. However, my loans are said not to qualify because I failed to consolidate them. This is despite having made payments automatically without fail for over 15 years.  My loans are handled by Navient, so it is only on paper, it seems, that they are not consolidated. I am planning to retire in a few months. On my current repayment schedule the loans will be repaid in 4 years. If I refinance, the period is extended and repayment is lengthened dramatically. Is there any point in refinancing now?

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Answer: The first thing to consider is that you may actually qualify for loan forgiveness now — and should reach out to your lender to see. Anna Helhoski, student loan expert at NerdWallet, says borrowers whose past payments were ineligible for Public Service Loan Forgiveness because they had not consolidated or they weren’t in the correct repayment plan have a second chance to qualify. “There is a PSLF waiver in effect through the end of October 2022 that makes previously ineligible payments qualify for loan forgiveness. All borrowers who think their payments may have qualified toward the 120 needed for discharge should submit the PSLF application available on the Student Aid website because there’s no downside to submitting an application,” says Helhoski. Plus, as of July 2021, members of clergy and others engaged in religious-oriented work are now eligible to participate in the PSLF program.

As to your question of refinancing, there’s no concrete yes or no answer here — instead, experts recommend weighing the pros and cons of refinancing, given your current situation. Refinancing can bring with it lower interest rates, reduced monthly payments, consolidating payments and adding or removing a cosigner. On the other hand, refinancing can mean stripping federal loan protections, being locked into a repayment plan, and needing to meet eligibility requirements.

Certified financial planner Don Grant says you need to look at whether the refinance will consolidate multiple loans into one with a lower effective interest rate — and watch the fees or prepayment penalties on a refinance.  “If fees are proposed, do not use that company. There are too many places that you should be able to find to refinance your student debt without fees,” says Grant. Even if there are no apparent fees to refinance, you’ll need to watch out for prepayment penalties, onerous late fees and high collections fees if you happen to default on the loan. Grant recommends asking the lender for a fee schedule that lists every fee you might encounter during the term of the loan. Because the goal with a refi is to lower the interest rate and still pay it off in four years, it’s wise to avoid prepayment penalties.

Note, of course, that “extending the term of the loan may also increase the total interest you’ll pay,” says Grant. “That can be the case even if the effective rate is lower [and that] may be worth it if your monthly payment is lowered substantially. You could effectively increase your monthly cash flow because of the lower payment.” If the monthly difference between the new loan and the initial loan is invested, it may grow to a greater value than the increased interest you’re paying for the loan. 

If however, you’re someone who is simultaneously near retirement and close to the student loan repayment finish line, the choice to refinance is up to you. “You may qualify for a lower interest rate on your student loans by refinancing, but if it extends your payment period beyond your finish line, there might not be much of a difference,” says Helhoski. Consider how it would affect the amount you would pay in interest before your refinance if you’re close to repaying your debt.