What you need to know about refinancing student loans?

What you need to know about refinancing student loans?

Refinancing student loans is the process of taking out a new loan to replace one or more student loans you already have so you can get better terms, such as a lower interest rate. It’s something you might consider if your credit score has improved since the time that you established your current loans and if in the interim you’ve paid off some debts and built your credit score. Another reason for refinancing student loans is to consolidate several federal loans into one new, single private loan.

Federal loans don’t offer a lot of refinancing options, so if you want to consolidate them, you’ll have to refinance with a private lender. You can apply for student loan refinancing online or offline (the choice is yours). Here in this blog post, we answer some questions as how you can refinance your student loan out there.

7 Questions you need to ask yourself before refinancing a student Loan

If you’re thinking about refinancing your student loans, consider these factors beforehand.  

1. How long do I plan to keep my loan?

A lower rate is great if you plan on holding onto the loan for a long time (more than 10 years). If not, it might not be worth it to refinance now if rates are still fairly low.

2. What interest rate am I currently paying?

If you have a high-interest rate on your current loan, you’ll want to make sure refinancing will save you money in the long run by getting a lower rate and paying less over the new loan.

3. Is there a prepayment penalty on my loan?

If your current loans come with steep penalties for paying off the balance early, refinancing may not be worth it. You’ll need to make sure you only refinance with a lender that does not charge this penalty, which is typically around 2% of the original loan amount.  

4. Am I able to consolidate federal loans with the new loan?

If you have federal loans, it might be worth it to refinance in order to consolidate them into one single private loan. You won’t pay more in interest in the long run, and it will be easier to manage just one payment each month instead of multiple payments.  

5. Can I afford the monthly payments?

Before refinancing, make sure you can afford your new payment amount. You don’t want to get stuck in a situation where you’re unable to make your loan payments each month due to personal circumstances like losing your job or an unexpected emergency expense.

6. Is there an origination fee on the new loan?

If the lender charges an origination fee, it will typically be 2-5% of the loan amount. You’ll want to make sure that your savings with a lower rate outweighs this fee.

7. Am I eligible for any borrower benefits?

Some lenders offer student loan refinancing and private student loans to borrowers with certain benefits. Keep in mind that some of these benefits, such as payment protection and career coaching, may come with an additional fee.  

How to Choose the Best Plan for refinancing your student loans?

There are countless options for refinancing student loans.

If you’re currently on an income-driven plan, your payments may be as low as $0 per month. Income-driven plans and public service loan forgiveness (PSLF) are the most popular options with borrowers because of their lenient terms. They also offer a variety of benefits, including loan forgiveness after 20 or 25 years of on-time payments.

You may want to consider an alternative repayment plan if you’re planning on having your loans paid off by the time you reach retirement age. You can choose a shorter repayment term with one of the extended plans, which are more expensive because they are amortized over a longer period of time. These repayment plans typically cost a few hundred dollars a month more than the standard 10-year plan.

If you want to lower your monthly payments without extending your term, you can choose an income-driven plan or switch to a graduated repayment plan before consolidating your loans into one account.

How ForeignAdmits can help with the Refinancing Student Loans?

At ForeignAdmits we make sure that you find out everything you need to know about refinancing student loans and we keep you updated on the latest news so that you can make decisions with confidence.

Many ex-students have benefitted from the refinancing options that we provide and we can help you too. So, it’s time to stop worrying about the high-interest rates that are offered right now and focus on paying lesser EMI’s.

Connect with us to know more.