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Refinance Student Loans Today – Consolidating your student loans can save you time and money. Find out how to integrate the pros and cons of each path.
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Refinance Student Loans Today
In total, they took out $1.5 trillion in debt to earn their diplomas, which wasn’t easy to pay back. About one in 10 stabilize their student loans, and while the average repayment time varies by the amount owed, it’s safe to say it takes at least 10 years and can take as long as 30 years.
How To Conquer Student Loans With Extra Payments
Members of the Class of 2019 who took out student loans have an average of $31,172 in debt and their payments are less than $400 per month. That’s a big, unwelcome graduation gift, so it’s important to know how to minimize the damage.
If all of your borrowed money is federal loans, you can find easier repayment options by applying for a direct consolidation loan.
If some or all of your student loans are from private lenders, you may need to use a refinancing program to achieve similar results.
Consolidation is one way to make repaying student loans more manageable and cost-effective. Consolidate all of your student loans and take out one large consolidation loan and use it to pay off the rest. You are left with one payment to the lender each month.
Is It Worth It To Refinance Student Loans?
The typical student borrower receives money from federal loan programs each semester of school. It often comes from different lenders, so by the time you graduate it’s not unusual to have loaned money to 8-10 different lenders. If you continue to borrow for graduate school, add 4-6 lenders to the mix.
Each of these student loans has its own due date, interest rate, and payment amount. Keeping track of that kind of schedule is complicated and is part of the reason many people default. That’s why student loan consolidation is such an attractive solution.
Federal loans can be consolidated in the Direct Consolidation Loan Program. You consolidate all of your federal student loans into one loan with a fixed interest rate. That rate is arrived at by taking the average of all federal loan interest rates and rounding the rate to the nearest eighth of a percent.
While this method won’t lower the interest you pay on federal loans, it will keep all repayment and forgiveness options open. Some lenders make it possible to lower interest rates by making direct payments or by making on-time payments over a longer period of time.
Refinance Your Student Loans
Refinancing student loans is similar to the Direct Consolidation Loan Program in that you bundle all of your student loans into one loan and make one monthly payment, but there are important differences you should note before making the decision.
Refinancing, sometimes called private student loan consolidation, is primarily for private loans and can only be done through private banks, credit unions, or online lenders. If you borrow from federal and private programs and want to consolidate the entire batch, it can only be done through a private lender.
The main difference between refinancing and direct loan consolidation is that by refinancing you negotiate a fixed or variable interest rate that must be lower than what you would pay for each loan individually. Lenders take into account your credit score and whether you have a cosigner in determining your interest rate.
However, if federal loans are part of your refinancing, you lose the repayment options and forgiveness programs they offer, including deferment and forbearance. The last two items are crucial if you face financial complications while repaying your loans.
How Double Consolidation Can Help Parent Plus Loan Borrowers
The average college graduate has about $8,000 on their credit cards. We can help you with your credit card so you can budget more money for your student loan payments.
There are many good reasons to consolidate through the Direct Loan Consolidation Program, and it keeps you alive with one of the income-based plans like Repay (Repay As You Earn), Pay As You Earn, and IBR. (Income Driven Repayment) and ICR (Income-Related Repayment).
There are two sides to every story, and here’s the other side to consider before jumping into the Direct Loan Consolidation program:
If you’ve missed payments because you’re struggling to keep up with multiple loan servicers and multiple repayment dates, consolidation or refinancing is a valid choice. Making one payment every month instead of several makes life simpler.
Thinking About Refinancing Your Student Loans? Here’s What You Can Expect To Pay
You can go through the Direct Loan Consolidation Program because it allows you to be open to income-driven repayment options that result in lower monthly payments.
However, if your payments are part of qualifying for any forgiveness program, it’s important to know that the clock will restart when you consolidate your loans. For example, if you’ve made three years of qualifying payments for Public Service Loan Forgiveness and consolidate your loans, you lose three years of qualifying payments and the clock starts over.
The big problem for most borrowers is whether they can afford the monthly payments. That’s the consolidation and refinancing solution: giving you one payment every month that won’t break your budget.
However, if you make enough money right out of the gate and are very dedicated to repaying your loan, the fastest and most efficient way is to go with the Standard Repayment Program and complete it in 10 years…or less!
When To Refinance Student Loans
Max Fay has been writing about personal finance for the past five years. He specializes in student loans, credit cards and mortgages. Max inherited a genetic predisposition to be tight with his money and liberal with financial advice. While working his way through Florida State University, he was published in every major newspaper in Florida. He can be reached at [email protected].
Want to help people understand their finances and equip themselves with the tools to manage them. Our information is available free of charge, however the services appearing on this site are provided by companies that may pay us a marketing fee when you click or sign up. These companies may influence how and where the Services appear on the Page, but do not affect our editorial decisions, recommendations or advice. Here is a list of our service providers. If you’ve got student loans hanging over your head, you know how hard it can be to pay them off—especially if you’ve got higher interest rates than the Empire State Building is slowing down and slowing your progress.
But refinancing is one way to speed up your debt repayments and save you a ton of money in interest. (Yes, that’s the only “funding” we’re interested in.) You’ve probably thought,
We’re here to answer all your questions about student loan refinancing and help you decide if it’s right for you – so you can ditch student loans for good!
Student Loan Refinancing May Save You Money
Student loan refinancing involves taking your private loans—or a combination of federal and private loans—and rolling them into a new loan. But remember, refinancing can only be done through a private lender.
Here’s how it works: The private lender pays off your current loan balances and becomes your new lender. At that point, you get a new loan with a new interest rate and new repayment terms. The goal here is to get a better interest rate or combine multiple loans into one payment.
But what if you only have federal student loans? With student loan relief ending in 2023, we know you’re looking for a way to soften the blow of payments.
While you can’t refinance your federal student loans through the government, you can do so through a private lender (yes, that includes Parent Plus loans). But you’re not guaranteed to get a lower interest rate on your federal loans when you refinance. In addition, you will lose access to federal relief programs and other rights that protect federal borrowers.
Infographic] Should You Refinance Your Student Loans?
So, if you’re struggling to keep up with multiple federal student loan payments, it’s best to look into student loan consolidation instead (which we’ll get into next).
Consolidation and refinancing are like the Jonas Brothers—they’re related, but different. The purpose of consolidation is to convert multiple loans into one loan. The goal of refinancing is to get a new interest rate (you can also consolidate your loans through refinancing).
Whether or not you should consolidate depends on what type of student loans you have. Federal loans can be consolidated for free by the government in what is called a direct consolidation loan, while private loans (or a mix of private and federal) must be consolidated by refinancing with a private lender. But student loan consolidation isn’t the right choice for everyone, even if you have multiple federal loans.
My student loan interest rate is too high. My variable interest rate is hard for me to budget for. At this price,
