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How to Refinance your Student Loans
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Reducing loan payments
through refinancing
The main goal of refinancing is usually to reduce your monthly
student loan payments. There are several ways to do this, and
most banks have student
loan consolidation programs.
When refinancing your student loans there are several things
to consider. First, you have both federal
student loans and private loans, you will want to refinance
them separately. Because of the way federal loans are structured,
you can get a much lower interest rate on them than you can on
private loans. Private student loans are basically personal loans
made with the assumption that your income will increase with more
education. If you mix the two together when you refinance, you
will end up paying a higher interest rate on the combined principal
than you would if you financed the two loans separately.
Second, student loan rates vary by lender and by your credit
history. So, before your refinance make sure your credit history
is in good shape. Review a credit report, and take action to fix
problems. Then, compare rates from different lenders. Rates on
for refinancing federal student loans change once a year (usually
around July 1). Currently the rates are very low, but it's difficult
to know how they will change as the economy changes.
What you need to qualify for low-interest rate refinancine fo
your student loans
Each lender has different qualification requirements for refinancing.
Most lenders require that none of your loans be in "in-school"
status - that is, you cannot be currently paying for education
using an active student loan. Some lenders have a minimum balance
requirement, and that balance is arbitrary. To find out what each
lender requires, visit the lendors listed above.
Two ways to reduce your student loan payments
When you refinance your student loans, you can reduce your monthly
payments either by getting a lower interest rate, or by extending
the duration of your loan. Of the two methods, getting a lower interest
rate is preferable since you are also reducing your long-term student
loan debt.
However, if your monthly payments are too high, extending the
duration of your loan can be a big help. Effectively, you extend
the period over which you repay your loans, so each payment is
smaller. Longer terms, though, usually mean higher interest rates,
and more interest payments. In the long run you end up paying
more, but the payments are more managable.
Resources to Refinance Student Loans
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