Reasons to refinance your student loans
Keeping track of your student loan payments can be overwhelming and time consuming not to mention being tedious as well. Coupled with the issue of not being really sure you have the best interest rates you can get. Maybe the rate is reasonable, but the monthly payments feel like more than you can afford.
Being faced with this it is no question that you need help considering whether to refinance your student loans.
Refinancing can be a great way to snag a better interest rate and eliminate a bunch of headaches in the process. You can also lower how much you pay each month — or even raise the amount if you’re looking to pay off your debt more quickly.
That being said, here are some major reasons why you should refinance your student loans…
YOU GET A LOWER INTEREST RATE
When you refinance your student loans, you combine all your federal and private loans into one new loan with a private lender. This private lender could be a bank, credit union or an online institution like SoFi or CommonBond.
Before giving you an offer, the lender reviews your income and credit score. If you have a steady job and strong credit, you could qualify for excellent interest rates, since these factors show that you’re not a risky candidate for a loan.
Most lenders look for a credit score of 650 or higher. If your score falls below that mark, applying with a cosigner could net you a better interest rate. Adding a cosigner to your application can be another way to reduce risk in the eyes of the lender.
The lender will offer you a variety of loan terms with both fixed and variable interest rates. Currently, variable rates tend to be lower than fixed rates at the beginning, but they could go up (or down) over time. Whatever you choose, lowering your interest rate could save you lots of money over the life of your loan.
MAKE GOOD USE OF A FLEXIBLE REPAYMENT PLAN
Banks and other private lenders aren’t usually known for their flexibility, but some do offer helpful repayment options if you go back to school or run into financial hardship.
SoFi, for instance, lets you defer your monthly payments if you return to school on at least a half-time basis. CommonBond offers temporary forbearance in the case of economic hardship.
Some private lenders also honor an existing six-month grace period if your current loan has one. So, if you refinance right after graduation, you may not have to start paying until your grace period is up.
Having said that, refinancing your student loans with a private lender means you lose access to federal repayment plans. Some of these plans include IBR, Income-Contingent Repayment (ICR) and Revised Pay As You Earn (REPAYE).
Plus, you won’t have access to federal loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF). So before refinancing, make sure you won’t need these federal programs.
RELEASE A COSIGNER FROM YOUR STUDENT LOAN
Sometimes if your parents are cosigners on your current student loans, it can add stress to your relationship with them. What’s more, your loan impacts your cosigner’s credit and their ability to borrow additional funds.
When you refinance with a private lender, you could be eligible to release your cosigner. Some lenders remove your cosigner from the loan after you make on-time payments for a certain number of months. Two banks that currently offer cosigner release are LendKey and Citizens Bank.
Once released, your cosigner can improve their credit score. As a result, they’ll gain access to new lines of financial capital if they need to buy a big-ticket item like a home or car.
If you’re tired of dealing with multiple student loans with various terms, research your student loan refinancing options. You could save money, time and a whole lot of hassle.