At a Glance
Almost 43 million Americans have student loan debt. You are not alone. The loans we have taken on to fund our education can be a massive task to pay down. And even if you can’t get your student loans forgiven, there is still hope. Student loan refinancing is a great option to take control of the debt and make the large sums easier to tackle.
Student loan refinancing is an effective way to reduce the amount of interest you’re responsible for paying on your student loan debt. A private lender will pay off your loans and rework a brand new loan with new terms can result in a lower interest rate for you to pay back. This will save you thousands of dollars over the years of loan repayment. Reducing overall costs of your student loan debt is an effective way to keep money in your pocket for the future.
Why should you refinance your student loans?
If you have federal loans, refinancing them will cost you the benefits that accompany federal loans, like income-based repayment plans and loan forgiveness programs. If you already have private loans, however, and are looking for ways to save money, refinancing your student loans can be a great way to lower your interest rates and create more flexible use of your monthly income for other bills and expenditures.
How Does Refinancing Student Loans Work?
Refinancing a student loan works by reducing the amount of interest you pay, which also means lowering your monthly payment. Lower monthly payments mean more cash on hand to pay other bills and living expenses that come up in our lives. Refinancing student loan debt is a way to lessen the burden of the monthly payments and make the process of repayment simple.
Why do people refine their student loans?
One of the typical reasons people want to refinance their student loans is to achieve a lower interest rate, but that is not the only reason to refinance. Finding a new loan to meet your goals over time is also an important thing to consider. Repaying the loans at a lower interest rate but taking more time to do so may not result in saving money. Choosing to refinance your student loans with a shorter time frame will increase the monthly cost in the short term, but save you thousands of dollars in the long run. This is why it is important to consult with financial experts to see that you are making the right choice to fit your needs and long term financial health.
Can you refinance or consolidate student loans?
It’s important to understand the difference between refinancing and consolidation. There are qualifying criteria you must meet for student loan refinancing. Lowering your interest rate is determined by what your current income is, your credit, and whether you have a cosigner. Typically, students fresh out of college that do not have enough credit built up will need a cosigner to get refinancing. Staying on top of your student loans the moment you leave college is an effective way to get ahead of them and protect your financial future.
If you’re one of those students fresh out of college, and refinancing isn’t an option, consolidating student loans can be an alternative option, and in some cases a better one. A Direct Consolidation Loan, offered by the U.S. Department of Education, has no application fee and consolidates multiple federal loans into one. Consolidating your student loan simplifies your payment structure while taking advantage of federal loan benefits, like having more time to pay off your debt, which can also lead to smaller monthly payments.
Refinancing student loan debt has many benefits, but it is also a very personal undertaking. Figuring out what type of student loans you have will inform where you should focus your plan. Seeking the best options to refinance is important. Researching which of the many options fits your unique situation will save you from headaches down the road. The decisions you make today will help provide a solid plan for your financial future. Working with a student loan refinancing specialist will give you a boost of confidence that you are making the best decision for you and your future.