You probably read the recent story of Robert Smith, the billionaire philanthropist who shocked the Morehouse College class of 2019 during his commencement address by announcing he will payoff their entire student debt (estimated at up to $40,000,000).
“On behalf of the eight generations of my family that have been in this country, we’re gonna put a little fuel in your bus… This is my class, 2019. And my family is making a grant to eliminate their student loans. ”Robert F. Smith – AP News
I’m excited to follow the future of these students as they continue to pay it forward.
If your student loans strategy is to wait around for an Angel Investor like Dr. Smith to pay off your loans, you may as well buy a Powerball ticket – I think your odds will improve. Did you know there is a mortgage product designed specifically to consolidate student debt?
Normally when you tap into your home equity to consolidate debt, complete home repairs, or make another investment through a refinance transaction you face what’s called a ‘price adjustment’ or a higher rate to pull cash out. If the debt you are consolidating is limited to student debt you get to ignore this ‘price adjustment.’
For example if we assume your market rate to be at 4.5% for a primary purchase or no-cashout refinance, your rate would be adjusted to approximately 4.875% for a standard cashout refinance. If you took advantage of the student loan program and only used the cashout proceeds toward consolidating student loans, your rate would stay at the lower 4.5%.