That’s a lot of money!
One thing I haven’t talked about much here on Making Sense of Cents is that there are many options for paying off your debt, such as by consolidating or refinancing your student loans.
Many don’t realize that they may be able to refinance or consolidate their student loans. I personally know this because I never once thought about either back when I had student loan debt.
Before you make the leap of consolidating or refinancing student loans, though, there are many things to think about. Continue reading below to determine if either consolidating or refinancing student loans is the right decision for you.
Consolidating Student Loans – Positives And Negatives
Consolidating your student loans is when you combine your student loans into one single loan.
If you have federal student loans, you may be able to do a federal loan consolidation. While federal student loan consolidation most likely won’t help you save money by combining, it may help you to better manage your loan payments. This is due to the fact that you will only have one bill each month after you consolidate (this is why it’s called “consolidation”).
Many graduates have over five different student loans to pay each month, which can cause a huge mess if you forget to pay one!
Related tip: I highly recommend Credible for student loan refinancing (they are the top student loan refinancing company and have great customer service!). You can lower the interest rate on your student loans significantly by using Credible which may help you shave thousands off your student loan bill over time. Through Credible, you may be able to refinance your student loans to a rate as low as 2.14%! Plus, it’s free to apply.
Refinancing Student Loans: Positives And Negatives
Student loan refinancing is when you apply for a new loan that is then used to pay off your other student loans.
This is usually a great option if your credit history or credit score are better than when they were when you originally took out your student loans.
By refinancing your student loans, you may qualify for better repayment terms, a lower interest rate, and more. This is great because it may help you pay off your student loans quicker.
The positives of refinancing student loans include:
One monthly payment to simplify your finances;
Lower monthly payments;
Lower interest rates; and more.
Companies, such as Credible (this is an affiliate link and I highly recommend them), allow you to refinance your federal student loans as well as your private student loans into one. The average person who refinances can save thousands of dollars on their loan, which is a great amount! You can save a lot of money through student loan consolidation such as with Credible, especially if you have high interest federal or private loans. Plus, Credible is giving Making Sense of Cents readers a $100 bonus when they refinance with Credible.
Before refinancing a federal student loan, though, you will want to think about different federal benefits that you may be giving up. You may give up income-based repayment plans, loan forgiveness for those who have certain public service jobs (such as certain jobs at public schools, the military, Peace Corps, and more). By refinancing federal student loans, you are giving up any future option to these.
However, keep in mind that by refinancing student loans, you may receive lower monthly payments, lower interest rates, and more. This may help you pay off your debt a lot more quickly.
Things you should think about before you take your next step.
Before you take your next step, I wanted to recap the above so that you are clear about what your choices are.
If you are able to take advantage of deferment, loan forgiveness, or some other sort of federal student loan program, you may want to think twice before you refinance federal student loans. I recommend reading USA Today’s article What careers can get you student loan forgiveness? for more information.
Be careful with variable interest rates. While they may seem appealing at times, remember that your interest rate may fluctuate. If you currently have a variable rate, you may want to refinance into a fixed-rate and this may make refinancing a great decision for you.
Consolidating your student loans usually leads to increasing your loan term, which may lead to lower monthly payments. However, it can also lead to higher interest charges over the life of your loan.
If your credit is better than it was when you first took out your student loans, you may be able to qualify for better terms and a better interest rate by refinancing student loans. I recommend shopping around to see what you can get. Start out by checking out Credible!
Do you have student loan debt? What’s your action plan to pay off student loans? Do you plan on refinancing your student loans?