Feel stuck with high student loan interest rates? You’re not alone.
Millions of Americans are buried in debt due to student loans. Fortunately, there are ways to make these payments easier on you.
Student loan refinancing is one of those ways. Refinancing can potentially save you thousands in interest over the course of your student loan. In this article we look at the benefits of refinancing, whether now is a good time to refinance, when you shouldn’t refinance and more.
Benefits of Student Loan Refinancing
Saving a lot of money is the main benefit of refinancing your student loan. Here’s a list of benefits that you may get from refinancing and some goals it can help you achieve…
- You can pay off your student loan faster, and become debt-free quicker
- Lower interest rates
- Save thousands of dollars in payments over the course of your loan
- Release a co-signer
- Reduce your monthly payments for student loans
- Refinance a parent loan in the student’s name
- Start a savings fund
- Focus on more important expenses and any other loans you may have
Is Now a Good Time to Refinance Your Student Loan?
For many, the answer here is YES! Now is definitely a good time to refinance your student loans. This is because interest rates have recently dropped quite a bit due to fears of an economic downturn due to the coronavirus outbreak.
When Should You Not Refinance a Student Loan?
Student loan refinancing is not a great option for everyone. If you refinance, you’ll be working with a private lender. If you currently have a federal student loan, by using a private lender you’ll lose out on many federal protections that comes with federal student loans. Protections such as income-based repayment options, forbearance or deferment on your loans, and loan forgiveness programs.
Refinancing is also an irreversible process. So if you decide to proceed with refinancing, you are not allowed to go back.
Also, refinancing is not a great option for those who work in the public service sector, i.e, those who work in the government or who do nonprofit work. This is because you could qualify for loan forgiveness after you have made 120 payments towards your loan which is a better option.
Lastly, educators and teachers who work at low-income schools, doctors and nurses in certain states and those who are or were in the military can also apply for loan forgiveness. That almost always is a much better option than refinancing.
Do You Qualify?
Not everyone qualifies for student loan refinancing. Private lenders have stricter eligibility requirements than federal loans.
You’ll have to prove that you have a stable income and steady cash flow. You’ll also need to have a good credit score. (If you don’t have either of those, you can look into having someone cosign your loan with you.)
Lenders may have different requirements so do your research on them before applying. Understand each lender’s requirements and see if you can qualify for refinancing before you start the process.