Refi student loan at a *higher* interest rate to free up cash?

[Jenny Gardner]

Hi BP community - I am looking to save for a downpayment for an investment property (my first after purchasing my home) however I have heavy student debt ($175K+) at a 4% interest rate. In order to improve my financing capabilities, it is wiser to:

A) Refinance at a *higher* rate (no more than 5%) to free up cash? 

Or

B) Continue paying down my current rate to improve my DTI and wait to purchase until I have less debt?

Thanks so much weighing in!

[Frank Jiang]

Don't do it.

I assume option A also increases the loan term length in order to reduce the monthly payment.  You will pay drastically more interest over the course of the loan if you choose option A.  The ONLY time it may make sense is if the increase in cash flow will allow you to make an investment that you wouldn't have otherwise been able to make to pay off your student loan in 1-3 years (it won't, it's not enough money).