How to save thousands on your student loan

Three top pieces of financial advice — from protecting your pension to the rise of the ETF

Re-financing those loans might be a smart bet.
(Image credit: iStock)

Here are three top pieces of financial advice from around the web:

Refinancing student loans

A growing number of private lenders are refinancing student loans, said AnnaMaria Andriotis at The Wall Street Journal, and "borrowers stand to save tens of thousands of dollars." One of the biggest lenders, Social Finance, offers from 1.9 percent to 5.19 percent interest for variable-rate loans or 3.5 percent to 7.24 percent for fixed-rate, potentially lower than many Stafford or federal Plus loans. The move makes most sense for borrowers with high credit scores and good jobs; lenders are generally looking for FICO scores no lower than 660. Borrowers who can't make that cutoff are "generally better off sticking with their existing loans," especially if they have federal loans that provide flexible repayment plans for those who are struggling financially.

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Monthly pension or lump sum?

If you're lucky enough to have earned a pension, you don't want to waste it, said Ian Salisbury at Money. When the time comes, it may be hard deciding whether to opt for monthly payments or taking the pension as a lump sum. Enormous checks "are tempting," but a monthly pension is usually the better deal. Not only does the money last for life, but you can typically opt for slightly smaller monthly payouts, so your spouse can continue to receive benefits after your death. Though taking the lump sum and investing it may seem like a smart bet, you're still likely better off with the monthly option, "even if you are the next Warren Buffett." The calculus really only changes if you're in poor health and unmarried, or in dire financial straits. Then "the math favors the lump sum."

The rise of the ETF

It's the "investment equivalent of a puttering hatch-back" overtaking "a gleaming Porsche," said The Economist. Exchange-traded funds are now a bigger business than hedge funds. ETFs had $2.971 trillion in assets at the end of June, $2 billion ahead of the hedgies' $2.969 trillion. Fifteen years ago, ETFs were less than a 10th the size of hedge funds. But "in a world of reduced returns, the low costs of ETFs are more attractive." ETFs trade like stocks, but hold a mix of assets that track the performance of a particular asset class, like the S&P 500, gold, or real estate. They often have extremely low fees, which can make them appealing to investors who already gravitate toward traditional index funds. Barring a "calamitous collapse," they're likely to keep growing.

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