Can You Refinance Student Loans? | 03.18.13
You can refinance your mortgage, but can you refinance your student loans? The short answer is: possibly. Let me elaborate.
Refinancing is a tool commonly used by borrowers in the housing industry to lower interest rates. In regards to student loans, refinancing options are not widely available and depend on the type of loan you have.
Consolidating Federal Student Loans
Federal student loans (such as Stafford Loans) are not able to be refinanced but they can be consolidated. For federal loans, you must consolidate them through a Federal Direct Consolidation Loan which determines your new interest rate as a weighted average. Unfortunately, weighted averages do nothing to lower your rate.
However, there are still some benefits to consolidating your loans, such as:
- It lowers your monthly payment by extending the term of the loan
- It makes managing your repayment easier by combing multiple federal loans into one
Probably not the answer you were hoping for, but consolidation can be helpful to those struggling with high monthly payments.
Federal consolidation loans are available to PLUS loan holders as well, though if you’re looking to consolidate a Parent PLUS loan with a student’s other federal loans, you’re out of luck. You cannot consolidate loans from two different parties, even if it all went towards the same education. This is true for spouses as well.
Refinancing Private Student Loans
Lucky for private student loan holders, there are refinancing options available. Because private loans are credit-based, the option to refinance at a lower rate does exist, but only through a handful of lenders. Before you refinance, check out what lenders are available to you and compare their benefits. Learn more about your options at StudentLoanConsolidator.com.
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