Another month, another ridiculously high student loan payment. Sure, taking out private student loans helped you pay for your dream school. But at this rate, you’ll be paying back your loans for over a decade. Suddenly the cost of that expensive liberal arts school doesn’t feel worth it anymore. Now you’re wondering if refinancing your private student loans might give you some relief. Good thinking!
Refinancing usually gives borrowers a lower, fixed interest rate and a lower monthly payment. That’s pretty sweet! But it’s not always the right choice. In this article, we’ll cover everything you need to know to refinance your private student loans and if it’s right for you.
Can I Refinance Private Student Loans?
Once upon a time, you couldn’t refinance private student loans. But that’s been changing. More and more private lenders are offering private student loan borrowers the option to refinance their loans.
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This is great because private student loans are pretty expensive compared to federal loans. Most borrowers take out private student loans to attend for-profit universities or to cover what federal loans couldn’t. This usually means they get slapped with higher interest rates and don’t qualify for repayment assistance programs, like income-based repayment plans. Allowing borrowers to refinance can bring them some major relief.
Can I Refinance Private and Federal Loans Together?
Yes, you can refinance your private student loans with your federal student loans through a private refinance company. However, you can’t do it the other way around. Good ol’ Uncle Sam won’t allow you to refinance your private loans and federal loans through the federal government. And depending on your situation, you may not want to.
While having just one payment is convenient, you may miss out on federal loan benefits. Like what? Well, let’s say you have both private and federal loans. If so, your federal loans are eligible for income-based repayment plans—which is convenient if money’s tight right now and you’re underemployed. Federal loans also qualify for loan deferment during school. This means you can pause making payments on your loans while you’re enrolled as a student. If you’re on any of these programs, you may not want to refinance your federal and private student loans together.
Also, federal student loans typically have lower interest rates, and you may wind up paying a higher interest rate on your federal loan balance if you refinance with a private company.
Should I Wait for Private Student Loan Forgiveness?
If you’re waiting for private student loan forgiveness, you’ll be waiting for a long time. There is no private student loan forgiveness program. Federal student loans qualify for forgiveness, but we don’t suggest holding your breath for that either. Less than 1% of student loan debt is forgiven.1 You’ve got a better chance at being audited.
In 2021, President Joe Biden announced that he will not use his executive power to forgive federal student loans, which nearly 92% of student loan borrowers have.2 He’s willing to entertain having a lesser amount forgiven, but it’ll have to go through Congress. At that rate, your grandkids will have a better shot of having their loans forgiven.
Is Refinancing the Right Choice?
It depends on your personal situation if you should refinance your student loans or not. But in general, refinancing private student loans is worth looking into.
Refinancing often gives borrowers a lower, fixed interest rate, which makes it easier to pay your loans off faster. This saves you a ton of money in the long run. Think of what you can do with all that extra cash!
Consider refinancing your private student loans if your interest rate is too high or you’re having a hard time affording your monthly payments.
If you’ve got federal and private loans, think long and hard about if you want to refinance them together. You could wind up missing out on federal loan benefits down the road if you refinance with a private company. Consider only refinancing your private loans now and possibly refinancing your federal loans later.
Look for a refinance company that offers you:
- Free cost to refinance
- A fixed interest rate
- A shorter repayment period
- A lower interest rate than what you currently have
If all of these are true, then you should totally go for it. If not, run the other way and keep looking for a refinance company that does offer these benefits.
Guide to Getting Rid of Your Student Loans
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