Refinancing means taking out a new loan (usually from a private lender) to pay off your existing student loans—often with a lower interest rate. But is it the right choice?
Pros:
- Lower interest rate: Could save money over time.
- Simplify payments: Combine multiple loans into one.
- Flexible terms: Choose new repayment length.
Cons:
- Lose federal protections: Forgiveness, deferment, and income-driven plans go away.
- Credit required: Need good credit or a co-signer for best rates.
- Variable rates risk: Some lenders offer variable rates, which can increase over time.
When to Consider Refinancing:
- You have steady income and good credit.
- You don’t need federal loan benefits.
- You want a lower rate or simpler payments.
Conclusion:
Refinancing isn’t for everyone, but if you qualify for a better rate and don’t need federal protections, it can save money. Shop around and read the fine print.
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