Many people don’t have a clear understanding of what student loan refinancing is. Some people think that they will be able to borrow more funds for new expenses when it comes to student loan refinancing. However, other people think that they can request forgiveness when they miss a payment.
Student loan refinancing is neither one of these statements. Student loan refinancing includes replacing your existing loan with a new student loan for lower interest rates on your student loans. You can refinance private and federal student loans. Student loan refinancing includes going to a lender with existing student loans and requesting that he/she will give you new loans to replace the existing ones. Upon approving this transaction, the lender will buy off your existing loans and will replace them by issuing you a new student loan. Another important aspect of student loan refinancing is that you can refinance them regardless if they have already been refinanced or consolidated.
Pros and Cons of Refinancing Student Loans
As with any service or product, there are advantages and disadvantages, no matter how the service or product is. Knowing the pros and cons alone will help you to determine whether refinancing student loans is right for you. Thus, the following is the pros and cons of student loans refinancing;
|Interest Rate ReductionUsually Required to Eventually Pay LessShopping Ability for the Best Terms||Fees are Refinanced.PSLF IneligibilityLosing Some Federal Loan Benefits|
As you can see, refinancing your student loans relieves the pressure that comes from staggering payments due to high-interest rates. Depending on your situation, these staggering payments can seem like it is a neverending financial strain. And if that is the case, student loan refinancing may be right for you. Otherwise, you may still want to use other repayment options besides refinancing if you need to retain federal loan benefits and eligibility.
Even if your financial situation is great, refinancing your student loans is still a wonderful idea if it will save you thousands of dollars. Other reasons why a person should refinance student loans are as follows:
- You desire to accelerate your repayment.
- Your loans come with high-interest rates.
- Your loans possess high variable interest rates that could dramatically increase.
- Instead of having different student loans, you desire simplicity by only having one student loan bill.
- You still want to pay off your balance as fast as possible even though you pay over the minimum payment each month.
As with any service or product, refinancing student loans have their pros and cons. The pros supersede the cons, so refinancing student loans is good for many people. However, this refinancing may not be such a good idea when refinanced fees may not be a better financial move for you. You also shouldn’t get your student loans refinanced if you want to retain your federal student loans’ eligibility and benefits.