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COVID-19, Loans, NJ debt relief, Student Loans

Should I Refinance My Student Loans During a Pandemic?

On Behalf of Veitengruber Law | Aug 20,2020

The recent trend in low interest rates has led some to refinance various loans. From home loans to student loans, refinancing has generally allowed people to reduce their interest rate and save money. But should you refinance your student loans? The answer to this question probably depends on what kind of student loan you have. Whether you have federal or private student loans, here is everything you need to know about refinancing. Refinancing involves acquiring a new loan to pay off all or some of your existing student loan debt. With this refinancing, your student loan terms will change along with your interest rate. Depending on your payment history and your credit score, you may be eligible for a lower interest rate than you previously had, saving you money. Refinancing is not consolidation, which allows you to combine all or some of your loan together into one payment. Consolidation also allows you to change the terms of your loan to lengthier timelines that will decrease the amount you need to pay monthly. Consolidation won’t necessarily save you money, though, while refinancing likely will. A word of caution: while it is absolutely possible to refinance federal student loans, it is not necessarily advisable to do so. Because there is no federal process through which to refinance your loans, you will have to go through a private lender. Utilizing a private lender may very well get you a lower interest rate and save you money in the long run. Federal loans, however, come with benefits. Government loans offer income-based repayment plans, forbearance options, and forgiveness programs. You will not have access to these programs if you refinance through a private lender. The best way to decide if you should refinance your federal student loans is to look at your potential savings. Check your credit score to see which lenders might be the best fit. Make sure you pre-qualify and try to determine what your interest rate would be. The prequalification process can also help you compare loan offers without negatively impacting your credit score. It's important not to solely focus on how much refinancing will save you month to month. You should also look into your overall savings and how quickly you could pay off the loan. Another option is to look into employer loan assistance. You may be surprised at what your employer offers. If you are looking for a job, try negotiating this into your benefits package. Refinancing is not the only option for decreasing your monthly student loan payment or the time you spend paying back your loan. You can make extra payments or pay more than you owe each month to reduce the principal of your loan quicker and save on interest. Many lenders offer auto pay discounts. The savings you earn from these discounts can go towards extra payments on your loans. While everyone wants to save money, take stock on whether or not saving money on your federal loans by refinancing is the right move for your specific situation. There are many different approaches to eliminating student loan debt as quickly as possible. If you are looking for help with debt management solutions, Veitengruber Law can help.


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