Friday, May 31, 2024

Is Student Loan Refinancing Worth It

Don't Miss

Student Loan Servicers Covid

Are Student Loans Worth It?
⢠Three-month emergency loan forbearance. Interest will still accrue.⢠Option to request two additional three-month forbearance periods, for a total of nine months.⢠All late fees are waived
⢠Payment deferral.⢠Option to request a forbearance period for two to three months .

Credible is excluded from this section because itâs a marketplace and not a loan provider. It does not have its own COVID-19 policy in place, so we recommend you refer to the loan servicers platforms for further information.

Consider Your Personal Situation Before You Refinance Student Loans

Refinancing is most beneficial for those with a steady income who dont need federal income-driven repayment plans, forgiveness programs or other federal protections. However, if youre worried about affording your monthly payments, your answer to Should I refinance student loans? should probably be no at this time, at least when it comes to refinancing federal loans.

Before you , make sure that the pros of student loan refinancing outweigh the cons. Whether it reduces your interest rates or monthly payments, refinancing should make your student loans more manageable.

Even if youre not a strong candidate now, you might be better suited for refinancing in the future. So before changing to a new loan servicer, consider the full implications of your decision.

If youre still not sure, ask yourself these questions before refinancing your student loans.

Should I Refinance My Student Loans 6 Cases Where The Answer Is No

You can learn all about the benefits of refinancing student loans here. In this guide, though, well focus on reasons not to refinance.

If any of the following conditions apply, you might be better off sticking with your current repayment plan:

Plus: Consider your personal situation before you refinance student loans

Also Check: How Do I Get My Student Loan Number

Is It Easy To Refinance Student Loans

Student loan refinancing can provide many benefits. But what are the chances that you’ll actually be able to qualify and take advantage of those perks?

While credit score requirements are typically reasonable, it can be challenging to maximize the value of the process unless your financial situation and credit file are impeccable.

Drawbacks Of Refinancing Student Loans

Student Loan Refinancing for Psychologists: Is It a Good ...

While refinancing is a good idea in some cases, here are a few scenarios where refinancing might not be worth it:


You might also be able to extend your repayment term up to 30 years to reduce your monthly payments though this means youll pay more in interest over time.

Learn More: Can You Refinance a Student Loan to a 30-Year Term?

Will Pslf Benefit You

PSLF sounds like a dream come true for many borrowers, but it can be incredibly hard to qualify for forgiveness. You must spend a full 10 years working for a qualifying employer while making 120 payments on your loans.

Thousands of borrowers have applied for PSLF. As of May 2019, 99% of them have been denied, highlighting how difficult it can be and why PSLF may not be a realistic option for many borrowers. To see if you qualify for PSLF and learn the steps to apply, use the help tool at

Deferments On Private Student Loans Are Not As Generous As They Are With Federal Loans

When you have federal student loans, there are options to defer student loan payments. You could temporarily postpone payments due to an economic hardship or if you become unemployed . If you refinance your federal loans, depending on your lender, you have more limited options or may not be eligible for any deferments at all.

Will It Actually Save You Money

Refinancing your student loans may not be the best option for you if the interest rate of the refinanced loan is not lower than your current loan rates. This can be difficult to calculate on your own, especially if there are multiple loans. Utilizing a good student loan calculator is essential. Crunching the numbers is an important part of making sure that you know what you are signing up for.

Is Studentrefinancing Worth It

Should You Refinance Your Student Loans?

A refinancing loan is worth it,especially if you can secure a loan with a significantly lower interest rate.This will help pay the student loans faster or reduce your monthly payments. Asa matter of fact, Forbes estimates that student loan refinancing can help yousave over $20,000 in the long run.

But not everyone can secure arefinancing. You will probably need a college degree, a good credit score, anda source of income that allows you to afford your expenses and debt payments.Keep in mind that unlike a federal student loan, a private student loan isntguaranteed by a federal government.

Furthermore, its crucial to realizethat you change your federally backed student loan to a private loan, althoughyou will forgo some;perksand safeguardsyou can lose your access to income-driven repayment programsand forgiveness programs.

Tips For Comparing Student Loan Refinance Lenders

Since the goal of refinancing is to save money on interest, youll likely want to choose the lender that offers you the lowest rate you qualify for. Variable rates tend to be lower than fixed rates, but they could go up in the future; only opt for a variable rate if you plan to pay off your loan quickly.

Similar to private student loans for those attending school, refinance loans arent required to offer the same consumer protections that federal loans do, such as income-driven repayment plans or forgiveness. But some refinance lenders provide more than the standard 12 months of forbearance throughout the loan term, and/or additional loan modification options for borrowers having difficulty making payments.

Refinancing is typically best for those with strong incomes and job stability. But life is unpredictable. If you think you might need to take a pause from payments or to lower your monthly bill, consider choosing a lender with a more generous forbearance policy.

Also, if you choose to refinance with the help of a co-signer, go with a lender that offers a co-signer release policy so you can take on the full repayment obligation when possible. That will protect your co-signers credit from the negative marks that could occur if you fall behind on payments.

Apply For Your Student Refinance Loan

After you choose the student loan provider that offers the best refinance rates and terms for your needs, you will need to apply to refinance your loan. This is typically done online or with an agent over the phone. You will need your identification, social security number, and your current student loan information including your account number and payoff amount. You may also be asked for things like proof of graduation and current income. Having your finances in order makes the process go faster and increases your chances of getting a low interest rate.

Consolidating Loans Into One Monthly Payment

Another benefit of refinancing is that it gives you the ability to consolidate your student loans into one simple monthly payment. Consolidating multiple student loans through a private lender like ELFI can help streamline the payment process and save borrowers money if they can reduce their interest rates or choose alternate loan terms.

While the federal government does offer student loan consolidation through the Direct Loan Consolidation program, this program rounds up your weighted average interest rate to the nearest one-eighth percent. Because of this, student loan consolidation and refinancing through a private lender can be considered more beneficial. Learn about student loan consolidation vs. refinancing.

Beyond the financial savings, refinancing is worth it for the peace of mind and simplicity of one monthly student loan payment. Going forward, youll have just one loan servicer and one monthly payment to remember.

Do Your Research On Refinancing Interest Rates

Is Student Loan Refinancing Worth It?

Rates will vary depending on where you go. Student loan refinance lenders will use your income and credit portfolio to gauge your risk as a borrower; the lower the risk, the lower the rate.

Theres no way to tell for sure what you will be offered beforehand because standards vary by lender. Some put a premium on a high income while others salivate at the sight of a good credit score. Research the average interest rates for your credit bracket so you can minimize the risk of being shorthanded by a lender. Know your value before negotiating terms and conditions.

How Does Refinancing Work

The word “refinancing” sounds complicated, but it’s not that bad.

Basically, you at a new, lower interest rate to replace your existing loan.

Why would somebody give you a new loan at a lower interest rate?

Hopefully between the time you applied for your student loan and today, you’ve graduated college, built your credit history and landed yourself a good job.

Not everyone is that lucky. But if you are, then to the eyes of lenders, you are a lower risk than you were as a college freshman.

What Credit Score Do You Need To Refinance Your Student Loans

Not all lenders publicly list their minimum credit score requirements. Of the lenders that we looked at while researching this article , Earnest has the lowest requirement. To qualify for a loan from Earnest, you’ll need a minimum credit score of 650.

If your credit score is lower than that, you may still be able to qualify for a loan if you have a cosigner on your application.

Some Things To Look For Include:

  • Do you have student loans with high interest rates?
  • Are there are better rates available?
  • Are you paying the minimum and getting nowhere on your loans?
  • Do you have multiple high expense loans?
  • Is your grace period over?

Take it from Bob over at The Frugal Fellow, who also refinanced:

Both my minimum payment and my interest rate were extremely high. My student loan payment basically looked like my rent payment. Obviously, that wasnt very manageable.

When Is It A Good Idea To Refinance Student Loans

Best Student Loan Refinance Companies 2021

Deciding when the time is right to refinance will depend on many circumstances. Additionally, whether or not refinancing is a good idea will depend upon the student loans that you have.

Private Student Loans The decision to refinance is fairly simple. If you can get a better deal meaning lower monthly payments and/or a better interest rate refinancing is a good idea.

Federal Student Loans Federal student loans are more complicated. When a borrower refinances their federal loans, they are converting federal debt into private debt. Borrowers that want to keep the federal perks and protections should probably avoid a refinance.

Important Reminder: Keep in mind that refinancing is not an all-or-nothing process. Borrowers can pick and choose the loans to include in the refinance. Some should choose only to refinance their private loans, while others may choose only to refinance one or two high-interest loans.

Are My Finances Stable Enough To Refinance

If you have federal loans and are struggling to make consistent payments, refinancing is also not for you. Instead, consider federal student loan consolidation or an income-driven repayment plan, if youre not on one already. These options wont save you money in the long term, but they can lower your monthly student loan payment and free up cash for other expenses.

If you have private student loans, you have nothing to lose by refinancing because private loans arent eligible for federal loan programs.;You also can’t;transfer private loans;to the federal loan program.

To find out whether your current student loans are federal or private, log into the governments online Federal Student Aid portal or the National Student Loan Data System. Any student loans that dont appear in these two places are private. They will most likely be listed on your credit report.

When Periodontists Should Refinance Student Loans

Lets take a look at the numbers comparing PAYE, a standard 10-year plan and refinancing:

This is a clear refinancing case because it will save Julia the most money by far when compared to the other two options.

PAYE would cost about $240,000 more to pay back her student debt and double the amount of time until shes student debt free . The refi payments are $1,700 higher per month versus her initial PAYE payment, but she can easily afford that on a $250,000 income. Its worth it due to the long-term savings.

Refinancing is much better than the standard 10-year plan because of interest savings. Both get her debt free in 10 years, but lowering her interest rate from 6.8% down to 4.5% will reduce the total cost of paying back her debt by nearly $50,000 and lower her monthly payment by about $401 per month!

Is Refinancing Your Student Loans Worth It

Advertising Disclosure: We hope you love our articles & product reviews. We may receive compensation from the links on this page at no additional cost to you. This does not influence our evaluations or recommendations.

If youve completed your college education and now you have student loan debt, youre probably wondering if refinancing your student loans is worth it. This article shares with you new tips and strategies to help you with all of your student loan refinancing needs.

Should You Refinance Student Loans During The Coronavirus Pandemic

Is It Worth it to Refinance a Student Loan?

With many Americans currently experiencing reduced income due to the coronavirus pandemic, student loan refinancing is an attractive option for those struggling to make student loan payments. Interest rates on student loans are at record lows, meaning now could be one of the best times to refinance your private student loans if you’ve been considering it.

It’s likely not a good idea to refinance your federal loans now, since interest and payments are currently waived on federal student loans through Jan. 31, 2022; by refinancing your federal loans, you would be required to make payments with interest and lose the ability to take advantage of any future federal relief programs.

The one exception is SoFi, which is currently offering a program that lets you refinance your federal student loans without interest charges until Dec. 20, 2021. However, it’s still wise to take a look at the other federal benefits you’d lose by refinancing.

If you have private student loans, there is little downside to refinancing if you can qualify for a lower rate. Rates are likely to only rise from here as the economy starts to recover, so locking in a fixed rate now could be a good option.

Learn more:Should you refinance your student loans during the COVID-19 pandemic?

Other Student Loan Refinance Companies We Considered

Navy Federal Credit Union Review

Minimum income requirements Individual: 21 months or more of credit history and a monthly income of at least $2,000.Cosigner: borrower must have a minimum monthly income of $100, and the cosigner must have a minimum monthly income of $2,000.
$7,500-$125,000 for undergraduate debt, $7,500-$175,000 for graduate or combined student loan debt
Loan types Fixed and varied

Navy Federal is the largest credit union in the world and specializes in banking and financial services to members of the military. Students who have any type of student loan with Navy Federal are eligible to use the Career Assistance Program, an online job training tool that provides tips on interviewing, resume building, and more. Parents who have loans for multiple children can refinance and benefit from student loan consolidation.

Why It Didnât Make the Cut

  • Limited membership: The credit union only services members of the military or those who have family or household members in the armed forces.

Common Bond Review

Loan types Fixed and varied

Common Bond has no origination or prepayment fees, and the application process is easy and seamless. Other highlights include Up 24 months of forbearance due to a national disaster, such as the COVID-19 pandemic, and a referral program that pays $200 if someone you refer to the loan servicer takes out or refinances a loan.

Why It Didnât Make the Cut

Citizens Bank Review

Loan types Fixed and varied

Why It Didnât Make The Cut

Can Anyone Refinance Through Sofi

Even though SoFi isn’t a traditional lender, it does have some tough eligibility requirements. Certain borrowers won’t qualify.

Here are the main things SoFi considers when you apply:

  • Minimum loan balance. You’ll need at least $5,000 in outstanding loans to qualify for a refinance. The amount could be higher depending on the state you live in. For instance, the minimum loan amounts for residents of the state of California is $10,000.
  • Employment status. SoFi wants to make sure you can pay your loans if you refinance. You’ll have to be employed or have a verified offer to start work in the next 90 days.
  • Cash flow. You’ll also have to show that you’re making enough money to cover all your bills, including your loan payments.
  • . When you consolidate federal loans, your credit score doesn’t come into play. That’s not what happens when refinancing private loans. You’ll have to go through a credit check when you apply. If you don’t meet SoFi’s minimum standards, you may have to bring a co-signer on board to seal the deal.
  • Residency. SoFi offers refinancing in 49 states and the District of Columbia.If you live in Nevada, you’re out of luck. You also have to be a U.S. citizen or a permanent resident.
  • School. Refinanced loans are only given to graduates of Title IV accredited universities and graduate programs. This means your school had to accept federal financial aid.
  • How Long Does Refinancing Take

    The entire process usually takes a month or two, up to 120 days. For some lenders, prequalification takes a few minutes with their online application. Final qualification may take 1 to 3 business days. Once you receive your loan offer, youll have 30 days before it expires. If you accept the offer, you have 3 days to rescind. Refinance lenders say to expect your original loans to be paid off in 14-30 days. Lenders generally say the first repayment comes due after 30-45 days. With some refinance lenders, the first repayment due date is relative to the time of disbursement; for others, it depends on the date of origination.

    More articles

    Popular Articles