Student Federal Article
The Untold Information about Student Loan Refinancing
There are many benefits to be gained by refinancing all of your student loans into one lump debt. You can find all kinds of information out there that tells you the benefits of doing this, such as lower payments and interest rates, but it is what they don’t tell you that could potentially pose a problem for you. All the benefits sound pretty good, but you need to take the time to do your own research and read the fine print, before jumping feet first into anything, especially of financial nature.
One of the advertised benefits of student loan refinancing is getting a fixed interest rate, so that you monthly payments don’t fluctuate along with interest rates, making it difficult to plan your budget. However, some of your student loans may already be at a fixed interest rate, and chances are, it may be a lower rate than what you could get with refinancing. So, you may not want to include those loans in your refinancing.
Just like any other loan, different lenders offer different incentives to get you to do business with them. They work hard to lure you to their organization, rather than their neighbor’s. Some lenders will offer you very low minimum monthly payments, while others will offer you the ability to have your payment automatically debited from your account each month, so you don’t have to worry about remembering a due date. Some will even offer to lower your already low interest rate if you make your payments by the due date for a certain period of time. To get the best deal, you have to take the time to compare what different lenders have to offer.
Another thing that you often are not told is that you cannot refinance a student loan that is currently in a delinquent status. Don’t make the mistake of thinking that you can refinance in order to bring your loans current again, because it doesn’t work that way. If you want to refinance your student loan debt, you have to get your payments completely caught up first. Then, the lowered payments can help you better juggle your budget to get other past due payments current as well.
If you have government student loans, and student loans from private banks or credit card companies, they cannot be combined into one lump loan. You will have to do two different loans, one for the government loans and one for the privately funded loans.
If you are having a hard time meeting your monthly payments on your student loans due to unforeseen financial difficulties, then you should consider requesting a deferment or forbearance period to give you time to get back on your feet. For most loans, you just contact the lender, and let them know the reason for your financial hardship, and the expected duration, and they will send you the appropriate paperwork to send back in. You are only allowed a certain amount of time that your loan can be in forbearance or deferment during your repayment period, but refinancing often starts that time over for you, so it is there if you need it.
Once you refinance your student loans, you can never do so again. You can’t refinance and find a better deal six months from now and do it again, so make sure you get the best terms that you can when you do refinance. It is possible, but very difficult to find a willing lender that can handle all of the refinancing restrictions recently imposed by the government.
Refinancing your student loans after graduation can be very beneficial to you, just make sure you know what you are doing.
