Can you refinance a private student loan if you have a student loan? Yes, you can. However, the decision can be complicated: there are pros and cons involved in this process.
In this post, you will discover the basics of refinancing student loans so that you can make an informed decision when faced with this choice yourself.
Refinancing can be a good idea if you have federal student loans
Refinancing can be a good idea if you have federal student loans. Federal student loans include the Stafford and Perkins loan programs, which make up the majority of student debt. Refinancing is also an option if your loan is serviced by one of these companies: Great Lakes, Nelnet, or FedLoan Servicing.
Refinancing private student loans should probably only be considered in exceptional circumstances; there’s no guarantee that rates will go down with refinancing (or even stay the same). Private lenders tend to charge higher interest rates than federal ones do because they’re riskier to lend to; they don’t enjoy any government backing like Fannie Mae, and Freddie Mac do with their mortgages.
“When you refinance, you replace your current loans with a new one, ideally with better terms,” as SoFi professionals say.
Before you refinance, talk with your parents
Before you refinance, talk with your parents. They can offer a better option than refinancing if they have good credit and can help you get a lower interest rate on a loan. However, this is only sometimes true: while some private loans can be consolidated into federal consolidation loans, others cannot.
Furthermore, if you’re planning on taking out another student loan in the future (for example, graduate school) or if you want to refinance again in the future (which happens more often than most people think), then it’s probably worth looking into refinancing at this time as well.
Use the refinancing calculator before you refinance
You can use the refinancing calculator to find out how much you could save by refinancing. The answer will depend on a number of factors, including how much you owe and whether or not you have any private student loans.
Using the calculator, you’ll know if it makes sense to refinance your loans and how much money you can pocket each month.
If this sounds like something that interests you but still needs to be answered, contact an expert financial advisor specializing in student loan debt management to help determine if refinancing is right for your situation.
Don’t rush into a refinancing decision
Take your time with a refinancing decision. It’s easy to be pressured into refinancing, but you should take your time and consider all the pros and cons of refinancing before you make the final choice.
Only let a lender pressure you into deciding if you understand the loan’s terms.
Refinance only if you can afford monthly payments at current interest rates or lower rates than those on your current loans (if possible).
If interest rates go down after you refinance, make sure that there are no fees or penalties for paying off early.
Refinancing is a great option if you have federal student loans. It allows you to consolidate your debt and lower your monthly payments. If you think refinancing is right for you, make sure to do it before interest rates go up!