Should you refinance your student loans? – FE News

The pros and cons of refinancing your student loans
When you refinance student loan debt, you are effectively exchanging your old loans for a new one. Student debt refinancing, on the other hand, is not for everyone. Here are some pros and cons of student loan refinancing.

Benefits of student loan refinancing

Your interest rate will be reduced.

If you refinance your student loans, you may be able to get a cheaper interest rate. Depending on the size of your loan and the new loan terms, you could save thousands of dollars. Say you have a $50,000 student loan with an interest rate of 7% and a repayment period of 10 years. You would save $8,918 if you could refinance this amount at a cheaper rate of 4% for the same period.

Pay off your school loans as quickly as possible.

You may be able to pay more for the principal amount of the loan since you are paying less interest on your student loan.

Simplify the management of your student debt.

Student debt refinancing is a type of consolidation. Student debt refinancing combines multiple loans from different lenders into one loan. This implies a single payment per month and a single due date. This could help you avoid late fines and missed payments.

Reduce your monthly payment.

You may be able to obtain flexible repayment terms from some private lenders. If you choose a longer payback period, your monthly payments may be cheaper. Keep in mind, however, that the longer your term, the more interest you will pay.

Remove a co-signer from your student loan.

If a parent or other family member co-signed your student loan when you were in college, they may want to get rid of it. If your current lender does not provide or you do not qualify for a co-signer release, refinancing loans will remove the co-signer as it is a new loan.

Look for a new loan officer.

If you are unhappy with the service provided by your current student loan officer, refinancing can help. Look for lenders with excellent customer service ratings.

Allow a co-signer to be released.

If you have a co-signer on one of your current private student loans, refinancing those usually releases your co-signer from any future obligations.

Disadvantages of Student Loan Refinancing

You will no longer be eligible for student debt cancellation.

If you convert a federal loan to a private loan, you will no longer be eligible for PSLF if you work as a teacher, nurse, lawyer, or other public servant. This includes the possibility of large-scale cancellation of federal student debt, as has been advocated. Student loan forgiveness through the Department of Education is not available for private student loans.

There is no income-tested repayment program for private student loans.

If you have federal student loans, you may qualify for a repayment plan based on your income. This is a method of tying your monthly payment to a proportion of your monthly income. Income-tested repayment programs are not available for private student loans. This option is no longer available if you are converting a federal loan to a new private loan.

Private student loan deferrals aren’t as liberal as federal student loan deferrals.

There are methods to delay student loan repayment if you have federal student loans. These guarantees allow you to temporarily defer payments if you encounter financial difficulties or lose your job (up to three years). If you refinance your federal loans, you may have fewer alternatives or not be eligible for forbearance or deferral at all, depending on your lender.

Variable interest rates may increase in the future.

You have the option of refinancing your student loan with a variable or fixed interest rate. If you choose a variable interest rate on your new loan instead of a fixed rate, the interest rate may increase over time. Variable interest rates are tempting because they start lower than fixed interest rates. If you’re sure you can pay off your student loans quickly, an adjustable rate loan is the best option.

For federal student loans, you will lose your grace period.

You will lose the grace period if you just graduated and refinanced federal student loans. A grace period is a period of time after you leave school or graduate during which you are not required to make payments. It normally lasts six months.

Refinancing is not accessible to everyone.

When it comes to refinancing student loans, there are a few standards to follow. Lenders have different criteria, but most will require stable work, a degree, a minimum amount to refinance, a credit score of 650, and a debt ratio below 50%. It’s time to decide if student debt refinancing is right for you after reading the pros and cons. If you decide to refinance, be sure to shop around with student loan refinance lenders to ensure you receive the best deal.

advised1 recommendationPosted in Education

About Judith J. George

Check Also

Student loans in England: what you need to know | Silver

Undergraduates can borrow tens of thousands of pounds to fund their studies, but when it …