Student loan debt doesn’t have to hold you back. With student loan refinancing, you have the ability to take control of your student loans and make them easier to manage. Find out how refinancing can help you customize your student loan repayment plan to match your payoff goals – while even saving you money.
Overview of Student Loan Refinancing
A student loan refinance is a type of loan offered by private lenders – such as banks, credit unions, or other financial institutions. When you refinance student loans, you apply for a new loan with the company of your choice for the amount of your existing college debt. You can choose to refinance federal student loans, private student loans, or a combination. And upon approval of your refinance, the lender will pay off your student loan debts and combine them together – leaving you with a single brand- new loan. Going forward, you’ll have just one monthly payment with one company to worry about, and your new loan will feature an updated interest rate and repayment term of your choosing.
Common Situations to Consider Student Loan Refinancing
Depending on your own financial situation and student loan payoff goals, refinancing could be an effective strategy to better manage your debt. Here are some of the most common situations that may make perfect sense for student loan refinancing.
You Want to Save Money
Who doesn’t love saving money? If you have the chance to save extra funds, it’s almost always a good idea. And whether you’re looking to save on total interest costs with a lower rate, or create more room in your monthly budget with a lower student loan bill, refinancing could help with both.
You Want to Pay Off Debt Faster
You may want to wave goodbye to your student loans and leave them in the dust – as soon as possible. If that’s the case, refinancing provides customizable repayment
terms – sometimes as short as 5 years – allowing you to pay off debt on your schedule. Paying off student loans more quickly can also be a great way to save the
most money possible on total lifetime interest.
You Have Too Many Student Loans
Some people need to take out a variety of student loans to fund their education. That could include multiple federal student loans and private student loans – all with
different lenders. If you’re feeling overwhelmed with the number of monthly bills and payments you have to keep track of, refinancing can simplify your finances.
You Have Federal Student Loans and Don’t Qualify for Alternative Repayment Plans
The U.S. Department of Education offers a variety of repayment plans for federal student loans including Public Service Loan Forgiveness, Income-Driven Repayment
(IDR) plans, and forbearance and deferment programs. If you have federal loans, you may be interested in the eye-catching benefits of some of these plans including
forgiveness and low monthly payments. However, each of these options has strict eligibility requirements such as where you work or how much you make. If you have looked into these plans and can’t qualify, refinancing could be a smart alternative to accomplish many of the same financial goals.
You Have Private Student Loans and Feel Stuck
Unlike federal student loans, private student loans don’t usually feature many repayment alternatives. That’s because they’re owned by individual financial institutions rather than the federal government. Typically, private student loan borrowers may be trapped with the original interest rate and repayment length they qualified for when the loans were first taken out. Sometimes, based on financial need or other special circumstances, private lenders may offer some repayment options such as deferment – but it’s usually lender and borrower dependent. If you feel stuck with an old interest rate and term, refinancing could be a way to customize your student loan repayment to be a better fit for your current needs