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Are you thinking of refinancing multiple student loan payments into one monthly payment? Lumping your loans this way makes paying them off every much simpler. Even better, you may be able to get a lower interest rate out of the deal.
However, there is a bit of a downside. If you refinance federal student loans, you may miss out on the opportunity to apply for income-based repayment plans or federal loan forgiveness programs. That being said, here are a few questions you should ask yourself before deciding to refinance your student loans.
Are Your Loans Private or Federal?
Federal student loans are loans issued by a federal student aid organization. Private loans are granted by independent lenders. While both types of loans can be refinanced, federal loans are sometimes eligible for loan forgiveness or repayment plans. If you refinance a federal loan through a private lender, you lose the ability to apply for these plans. Check to see if any federal student loan assistance is available before you refinance.
Do You Qualify?
In order to refinance your student loans, you first need to be approved. To qualify for refinancing, you’ll need a steady income and a decent credit score. There may be other requirements, depending on the lender you’re working with. Go over the requirements before you apply, and see if you think you qualify before proceeding.
How Much Will You Save?
The biggest benefit to refinancing is the ability to renegotiate your interest rate. When you first applied for a loan, you likely had to settle for a high interest rate because you were a new student. But, chances are, your financial situation has probably improved since then.
Working out a refinanced loan with a lower interest rate can add up to a lot of savings at the end of the year. Plus, if you need to save a bit more money, you can choose to make lower payments over a longer period to give you more money to work with each month.
As you can see, there are benefits to refinancing a student loan. Researching the possibility could potentially save you thousands of dollars. What could be better than that?
