Student loans can be a tricky subject for most. Many Americans have student debt, as it is common to borrow money to put toward your college education, books, and boarding. However, it does not have to be as daunting as it feels: being educated on how to best pay off your student loans is crucial to keep your credit score steady.
Still, students often want to change their loan terms after they graduate. One popular idea is to lower your interest rate, and the route that many take is through refinancing. Refinancing will mean less interest on your loan, but make sure that this is the best option before you potentially make your loan that much trickier.
Benefits of Refinancing
If you choose refinancing, there are several benefits of doing so. Refinancing your student loans can mean a lower monthly payment. While this lengthens the time of your loan, it is typically much better on the budget for someone newly entering the workforce. It is important, however, to be careful to realize that this means that interest may be higher with this extension. Still, it means you can pay as you earn and this makes life much easier.
Speaking of lower payments, refinancing your student loan can also create a more flexible payment plan. Many loan providers offer an income-based payment program and this can help any budget fit in a monthly student loan payment. While private loans are not as forgiving as federal loans, ask your bank for options such as Interest Only Payments, an Economic Hardship Deferment, and Grace Periods in which you do not have to pay off the loans for a set period of time.
Refinancing Changes Loan Terms
When you refinance your student loans and agree to a lower interest rate, which depends on whether you have a cosigner and your credit score. While this sounds like a great option at first, discuss the fine print before you sign anything. This is a new loan with new conditions, so make sure they work for you.
Federal student loans have certain protections as well. Most private loans do not have loan forgiveness options like federal loans do, and if you’ve refinance federal loans to private, this cannot be reversed. Educate yourself on these protections, and which apply to you, and decide whether this is the best option for you.
Explore Your Options
While refinancing student loans may be the best option for some, it may not be the same for others. Make sure that you understand your own loans, budget, income, and do what is best for you. There are other ways to reduce loan interests. For example, if you pay extra each month, you can help lower interest. Resources such as consolidatestudent.loan can help you understand other options to help lower your hefty student loans.
Student loans are a scary subject; too many of us feel as if we do not have the right information to deal with them correctly. However, what is truly important is that graduates ask questions, and candidly speak to their loan providers and banks. Check with your bank and loan provider to weigh your options and lessen your student loan stress.