Student Loan Refinancing
Refinancing your student loans can be a great way to save thousands and reduce your monthly payments.
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Student Loan Refinancing Options
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The average college graduate has debt of over $30,000 and it can take decades to pay off. Student loan debt could affect your ability to save for retirement, have disposable income, or qualify for other loans, including a mortgage. Dealing with long-term debt can be challenging, but having a strategy and tools can help. Consolidating or refinancing student loans are two popular options that could help you manage your payments, save money, and open additional options for loan forgiveness and repayment. This guide provides a detailed explanation of the differences between federal loan consolidation and private loan refinancing, the pros and cons of each, and an idea of which options are best for different situations. There are a variety of private lenders offering student loan refinancing, each with different potential interest rates, loan terms, and features. US News compared private lenders to provide recommendations for different types of borrowers.
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Why You Should Refinance Your Student Loan
Refinancing student loans can lower your interest rate, saving you thousands in total interest and allowing you to make monthly payments that pay off your loans faster. It can also provide peace of mind by allowing you to lower your monthly payment, lock in a fixed interest rate, or remove a parent as a cosigner from a private loan.
How to Refinance Your Student Loans
Refinancing student loans allows qualified borrowers to adjust the interest rate and payment terms of their private and federal student loans by obtaining a new loan that pays off part or all of their existing educational debt. Borrowers can refinance student loans through various private lenders. Since rates and criteria vary among lenders, it’s important to shop around to find the best lender for you. Creditlief makes it easy to compare multiple lenders in just a few minutes. Depending on the interest rate and the number of years it takes to repay your new loan, refinancing may reduce your monthly payment, the total interest paid, or both.
Refinancing vs. Consolidation
However, borrowers who refinance federal student loans also forfeit the benefits provided by federal loans, including access to income-driven repayment programs that may qualify them for loan forgiveness after 10, 20, or 25 years of loan payments. Some lenders will accommodate borrowers experiencing temporary difficulty in repaying their loans, but few offer income-driven repayment plans or loan forgiveness. Federal student loan consolidation through the government provides the convenience of a single monthly payment but does not reduce your interest rate. However, it may reduce monthly payments by qualifying for income-driven repayment options that extend payments over a longer period. Borrowers who do not qualify for student loan forgiveness may end up paying significantly more in interest payments.