Can You (And Should You) Refinance Your Student Loans?

If you have student loans, you’ve probably considered refinancing more than once. One question likely stopped you from going through with it: Is this a wise choice? It’s a common thought that many of our clients aren’t sure about when they come to us. So, should you refinance your student loans? We can help you decide. Take a look at these five considerations to help you decide if refinancing your student loans align with your financial goals.

1. Determine the type of student loans you hold.

Generally speaking, there are two primary types of student loans: federal loans and private loans. The types of loans you hold may impact your decision to refinance. Take a few minutes to review all your student loan origins. Are they federal loans, private loans, or a combination of both? While private loans can be refinanced, federal loans cannot. Instead, you can combine several federal loans and possibly lower monthly payments through a process called consolidation.

2. Consider an income-based repayment plan for federal loans.

For federal loans, consider enrolling in an income-based repayment plan. These plans can lower your monthly payments based on your monthly take-home pay. Plus, after twenty to twenty-five years of consistent payments, the remainder of your federal loan debt will be forgiven. Consider, too, that if you convert your federal student loans to private loans, you won’t be eligible for any future federal loan forgiveness programs. That’s why it may be favorable to keep your federal student loans intact.

3. For private student loans, consider refinancing.

If you hold any private student debt, it’s worth looking into refinancing these loans at this time. With interest rates at historically low levels, you can negotiate a new interest rate that may reduce your overall student loan burden, and lower the amount of interest versus principal you’re repaying on a loan. Refinancing loans can potentially lower your monthly payments and make private student debt more manageable.   

4. Take a calculated approach to refinancing.

If you have a solid credit score and a strong history of loan repayment, there’s a good chance you’ll be able to take advantage of securing a new, lower interest rate for your private education loans. Just remember to do your due diligence by collecting loan refinancing quotes from several different reputable lenders before you make your decision. A financial advisor can serve as a sounding board as you walk through the refinancing process.

5. Check on your variable-rate student loans.

If you hold any variable-rate student loans, you might consider refinancing these loans with a fixed-rate loan. If you make the choice to keep a variable rate student loan, you can see dramatically different monthly payments that change depending on changes in interest rates. Transferring these loans to a fixed-rate loan can help to lessen the impact of market volatility and provide you with a more consistent and sometimes lower monthly payment plan. A financial advisor can help you determine if you hold any of these types of loans. 

Let Southwestern Investment Group Answer Your Questions About Student Loans

If you’re not sure how to begin refinancing your private educational loans, our advisors can guide you through the process of identifying your loan sources and answering any questions you may have about refinancing student loans. Contact Southwestern Investment Group today to schedule a consultation!

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