Student loans have become a hot topic in the United States of late. Many feel overwhelmed by the term and size of their loan(s). Some are trapped in sky-high interest rates and they believe this is permanent. Unfortunately, in some cases, this is true, but in a lot of cases, student loans can be refinanced. There may not be a better time to explore this option than right now.
What Exactly Does It Mean to Refinance a Student Loan?
Well, if you are like most people, you have multiple student loans. Their interest rates and terms almost certainly vary. This can be complicated and expensive. When student loans are refinanced, they are consolidated into one loan with a lower interest rate. In addition, refinancing may give you:
- One monthly payment as opposed to several;
- One loan servicer to deal with;
- A shorter loan term; and/or
- Term flexibility.
So, this sounds great, right? Why doesn’t everyone refinance their student loans?
Refinancing Is Not for Everyone
When you enter a repayment plan with a federal entity, you are afforded certain advantages which are not available when working with a private lender.
Federal repayment plans – give you access to income-driven terms which change your monthly payment based on your income.
Public service loan forgiveness – individuals working in some government positions, teachers, full-time AmeriCorps and PeaceCorps volunteers, and more may be eligible for loan forgiveness through the federal government.
Forbearance and deferment – these tools can help you circumvent unforeseen circumstances.
You may be eligible for federal student loan consolidation. This is like refinancing through a private lender. A couple of distinct differences are the figuring of the interest rate of the resulting loan (the government uses the average of the interest rates of the existing loans) and federal consolidation only allows you to combine federal loans. If you have private loans, they will not include those in consolidation.
So, Should You Consider Refinancing?
In many ways, a student loan is the same as any other loan. You are borrowing from a lender whether it is the federal government or a private entity and as such, there are limitations as far as eligibility such as credit score, history of on-time payments, and ability to pay back debt based on income.
You may want to consider student loan consolidation if:
- The process will be impactful financially;
- At least one or two of your loans are from private lenders (not necessary, but worth noting); and/or
- Your current loans have high-interest rates.
The prospect of refinancing can be as daunting as the implications are complex. As such, the navigation of this issue calls for the skills and experience of a financial professional. Elias Dsouza of Dsouza Legal Group is that professional. For over 15 years, he and his team have been assisting people just like you to relieve their financial burdens and improve their lives. Contact the team today for a free consultation today and improve your life.