Over the past several years, more student loan borrowers are finding themselves buried under overwhelming student loan debt.
As student loan debt has turned into a full-fledged crisis, student loan refinancing companies have emerged to provide relief to student loan borrowers. These student loan refinancing companies — which are private lenders, unrelated to the state or federal government — offer a solution to student loan borrowers looking to lower their high interest rates and make student loan payments more manageable.
Through student loan refinancing, borrowers can refinance high-interest student loan debt and potentially score a lower rate, saving thousands of dollars in interest over time. Those savings can then go toward extra payments to get out of debt even faster. Additionally, borrowers can select a longer term to obtain a lower monthly payment as well.
3 Questions to Determine if Refinancing Federal Student Loans is Right For You
While refinancing can be a major financial improvement to those who qualify, there’s one (big) caveat.
When you refinance your federal student loans with a private lender, you forfeit most federal student loan protections. Student loan refinance companies can refinance both federal and private student loans, but given this one potential issue, many borrowers often ask us: Should I refinance my federal student loans?
Read on for tips and tricks to help you decide.
1. How much money can you save by refinancing federal student loans?
When you refinance federal student loans, you give up benefits such as income-driven repayment plans and loan forgiveness, so it’s important to analyze if the risk/reward of refinancing makes sense.
Refinancing your federal student loans can get you a better interest rate, and save you money, but how much you will actually save by refinancing? Be sure to run the numbers with our student loan refinancing calculator.
Student loans most likely to benefit from refinancing include Grad PLUS and Parent PLUS loans, which bear relatively high interest rates ranging from 6% – 9% depending on the year you obtained them.