Refinancing Student Loans
Refinancing is a form of loan replacement. Essentially, the borrower asks for a new loan product that will stand in place of the previous product, and once that new loan has been approved, the old one is cancelled altogether. Typically, this is the sort of step savvy borrowers take when borrowing money is inexpensive. By refinancing, they can get rid of their high-interest-rate loans and get a new product that might have more favorable terms. It’s not surprising then that many people find the idea of private student loan refinancing so appealing.
Student Loan Forgiveness
Those who hope to refinance student loans may face fees and other unexpected surprises, so it makes sense to ensure that all avenues have been explored before families investigate the refinance option. Sometimes, people find that the loans they’re dealing with are eligible for student loan forgiveness programs and don’t even know it.
As an example, in an article in the Observer in New York, experts suggest that about 25 percent of people at work in the United States are eligible to participate in loan forgiveness programs. Typically, people must have a decade of on-time payments behind them, and the balance of the loan could just disappear, if a few key requirements are met. Those who qualify might not even need to learn about student loan refinance options.
- A good income
- The value of assets, like a house or a car
- An excellent credit score
- A steady relationship with a bank
All of these factors could allow students to lock in a loan at a low interest rate, making the idea of refinancing more than worthwhile.
Finding a Lender
While this option might be enticing for many students, the Consumer Financial Protection Bureau suggests that few banks offer refinancing for student loans. The financial institutions might feel as though the loans have a low profitability rate, or they might find that few people sign up for these products. In any case, there are at least a few banks that do offer these products. We can help you find them.
What is refinancing?
Refinancing is replacing your existing debt or loan with another loan, generally with more favorable terms. Essentially, you pay off the debt with the proceeds from another loan and enter into a new loan agreement.
When should I refinance?
If you have a private student loan with high interest and high monthly payments, you may consider refinancing. Also, if you have better assets that can help you toward better loan terms, refinancing can be a positive option.
Where to refinance?
Refinancing a student loan isn’t profitable for many lenders, so it can be hard to find someone willing to help with a student loan refinance. The U.S. Department of Education Direct Loan Program offers refinancing for some student loans, as do some banks and other financial institutions.
Why should I refinance?
If your initial student loan carries high interest and high monthly payments, and you are in a position to negotiate better terms, including lower interest and lower monthly payments, you should think about refinancing. If you are not happy with the level of service provided by your lender, or you require a more flexible repayment plan, refinancing may be considered as well. Furthermore, if you initially had a co-signer like a parent and wish to release them, you may also consider refinancing.