You may have heard about refinancing your student loans. But are you wondering if it’s even possible? Is it worth it? Here’s what you need to know about refinancing, including which types of student loans can be refinanced and how much money you might save by finding the lowest student loan refinance rates:
Private student loans
If you’re looking to refinance your private student loans, check with your lender first. If they allow you to refinance with another lender and don’t charge a penalty fee, then this is a great way of lowering your monthly payments and saving money in the long run! However, if the refinancing option is off-limits for any reason or is unavailable in your area (for example), then it’s recommended to consider consolidating.
If you want more information about how refinancing works or what benefits there are, you can go to professionals like Lantern by SoFi.
Federal student loans
Federal student loans are available to students who need financial assistance to attend college. These loans include:
- Direct loans, which are available to both undergraduate and graduate students.
- Perkins loans, which are only available for undergraduate study.
- PLUS loans, which allow parents or graduates to borrow money on behalf of a student.
Parent PLUS loans
Consolidating Parent PLUS loans is a great way to reduce your monthly payments and make them more manageable. To consolidate, you would need to request a consolidation application from your lender (or the bank that holds your loan), then fill it out and send it in.
However, there are some things to be aware of before you consolidate:
- You can only consolidate one loan at a time – so if you have multiple Parent PLUS loans, they’ll all need to be consolidated together into one single payment.
- It’s possible that even after consolidating, your payments will still increase. If this happens, contact your loan servicer right away so they can work with you on finding an alternative solution.
- You cannot touch or change any terms or conditions of the original loan agreement when consolidating; everything becomes part of the new consolidation agreement.
- Consolidation loans. Consolidation loans are available to borrowers with multiple student loans, so if you have a mix of federal and private loans or multiple types of federal student loans (for example, Stafford and Perkins), consolidation could be an option for you. But it’s important to understand that these aren’t just refinancing transactions; they’re actually different from debt consolidation in general since they allow borrowers to combine their existing obligations into one single loan.
- Interest rates on consolidations tend to be lower than those on refinanced private or FFELP loans — 3.25% today — but this is somewhat offset by the fact that your payment will increase when you consolidate unless all your other debts are fixed at a higher interest rate than yours was before consolidation took place.
Many options are available if you’re looking to refinance your student loans. Whether you have federal or private loans, you must understand what types of loans can be refinanced and how they differ from one another before deciding on the best option for yourself.