Student loan refinancing or consolidation is definitely not a scam, however, there are predatory companies that we’ve discussed before. In fact, many reputable lenders offer student loan refinancing. Student loan refinancing is something that everyone with student loan debt should explore, but they need to be clear about what is and isn’t important to them.
For example, do they want to save on monthly payments? Pay less interest over the lifetime of their loan? Or do they need income-based repayment programs that Federal loans offer? These are important questions to ask yourself before considering student loan refinancing.
Next, make sure that you look for any hidden fees or costs associated with refinancing. Many direct lenders and marketplace lenders today are transparent, but there are still some “student aid agencies” that are not. The best thing to do is use a calculator to see if student loan refinancing makes sense.
Student loan consolidation is the same thing as student loan refinancing.
Another common myth is that student loan consolidation is the same thing as student loan refinancing. While in some ways similar, they are two different processes that serve two different purposes.
Student loan consolidation is the process of consolidating all of your student loans into one single loan and payment. This is typically done for Federal loans, and can be done free of charge at StudentLoans.gov or for consolidation you can contact Bruce Mesnekoff.
However, with student loan refinancing, you actually take out a new loan, and use that loan to pay off all other existing loans. This could be done for one loan or many. Some borrowers refinance in order to consolidate multiple loans. The benefit of refinancing is that you are able to change your loan terms – simply because you are taking out a brand new loan. With the new loan, you can decide on length and interest rates that make sense for you.
Can’t Refinance Federal Student Loans ?
This myth continues to be perpetuated because the government doesn’t offer student loan refinancing. However, borrowers can refinance their Federal student loans into private student loans, and many companies offer this service.
There are definite benefits to keeping your Federal student loans, but if you’re making a steady income, there might be opportunities to save. You just need to know what you may be forgoing by refinancing Federal into private student loans.
The most common reasons to keep Federal student loans are:
1. you take advantage of student loan forgiveness programs.
2. you take advantage of income-based repayment plans.
However, borrowers shouldn’t dismiss student loan refinancing into a variable rate student loan. Many variable rate student loans offer significantly lower interest rates compared to fixed rate loans. As a result, even if these loans adjust over time, in many scenarios, the total savings will be less versus a fixed rate loan. You can see a variable rate student loan calculator to discover whether a variable rate loan makes sense.
Contact Bruce mesnekoff for any further assistance
Student Loan Help Center General Manager Bruce Mesnekoff joins us to Discuss the Student Loan Situation in America
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