Financial issues can be a major stress in life, especially for college students. The issue of paying tuition can often feel overwhelming when you have to factor in room and board, books, and other everyday expenses. Taking out student loans is one way to pay for college. In fact, there are millions of students who rely on loans to fund their educations. However, it must also be noted that student loans do have its fair share of pros and cons when it comes to refinancing.
With the increase in college tuition fees, student loans are becoming an increasingly popular way to pay for school. Unfortunately borrowing money to pay for school can be expensive and can lead to other debt problems down the road. This article will detail the pros and cons of refinancing your existing student loan debt with another lender. It will also provide you with how ForeignAdmits can help you with an easy refinancing solution.
Borrowers who are not happy with the interest rates of their current loan may want to think about refinancing their existing debt. Many lenders have taken cues from home mortgages and are now offering special incentives for borrowers looking to consolidate multiple student loans into one loan with a lower interest rate. Just like you refinanced your home to take advantage of lower interest rates, you can do the same with student loans.
Pros and Cons of Refinancing Student Loans
Pros
For some people, refinancing student loans is an effective way to consolidate their debt and save money on interest. There are many benefits that come with refinancing your student loan.
Lower Interest Rate
You could qualify for a lower interest rate through refinancing. Many times, banks and credit unions will offer reduced interest rate options to interested borrowers.
Lower Monthly Payment
If you consolidated your student loans into one, this will reduce your monthly payment. This may also allow you to qualify for other loans that you couldn’t before because of the high amount of your monthly payment.
Flexible Payment Terms
Depending on the terms of your new loan, you may be able to make lower payments or extend the time you have to pay off the loan.
Combine multiple loans
If you have several federal loans, you can combine them into one refinanced loan to simplify your repayment. This will also reduce the number of payments you have to make.
Fixed interest rates
You could have a fixed interest rate if you refinance with a specific lender instead of keep your variable rate through federal loans. Lower rates are an incentive for many borrowers.
Save more money
You can use the money saved on lower repayments to start saving for retirement, buy a house or car, or pay off other debt.
Cons
There are also several downsides to refinancing and borrowers should be aware of them before they make a decision:
Higher risks
The rates offered on federal loans are fixed and may be lower than the refinanced loan. You should weigh both options before you decide which option is best for you.
Much of the process is online
To refinance student loans, you may have to work with a company that is online only. If you prefer face-to-face interactions, refinancing may not be the best option for you. Make sure that the company is a genuine one otherwise you might get scammed.
Increased responsibility
When you refinance federal loans into a private loan, the lender will require that you pay off the debt before you graduate. This can impact your planning for the future.
Loans are no longer forgiven
Student loan forgiveness is available to borrowers who work in public service or meet other criteria. When you refinance your student loans, you will not be eligible for forgiveness.
Loss of certain benefits
You may lose certain government benefits, such as interest rate reductions on some types of federal loans, if you refinance through a private lender. Refinancing can make it more difficult to apply for other types of government programs, such as income-based repayment plans or student loan forgiveness programs
Refinancing can be a great way to consolidate your debt into one simple payment. Not only will you have just one bill to worry about each month, but you might also qualify for a lower interest rate. Refinancing isn’t an option everyone will want to pursue, so before you make any decisions it is important to weigh the benefits and downsides of refinancing your student loans.
How ForeignAdmits can help you refinance your student loans?
ForeignAdmits has a group of international student loan experts who have been refinancing loans for students who have pursued their higher education. We have helped thousands of students save money on their monthly payments and we want to help you too.
Our team can provide you with all the information you need about whether it makes sense for you to refinance your existing student loans. We can also quickly connect you with one of our preferred lenders that can help you save money by refinancing your loan.
Connect with ForeignAdmits today.