If you have student loans that you’d like to get rid of sooner rather than later, refinancing may be a smart move. By refinancing your student loans, you can:
Reduce your rate and save on interest costs.
Get a better repayment term for your financial situation.
Simplify your monthly payments with one loan and one loan servicer.
Fortunately, the process of refinancing a student loan can be simple. To begin, start by checking what rates and terms you qualify for using PenFed’s Find My Rate tool. Once you find the right solution for your needs, select the term and monthly payment. Then, gather your ID and official loan statements, as you’ll need these documents to complete your application — which shouldn’t take longer than 10 to 15 minutes.
Lastly, sit back and wait for a decision. If you’re preapproved, you will then need to upload documents like an ID, loan statements, graduation verification, and a paystub to verify the information listed on your application. Throughout the process, you should continue to make payments on your current student loans until PenFed has paid them off.
There are some different pros, cons, and things to consider when refinancing private student loans versus federal loans. Here’s what to know about each.
Since private student loans are provided by private lenders and aren’t affiliated with the U.S. Department of Education, you won’t lose any federal benefits if you decide to refinance them. So if you can lock in a lower interest rate by refinancing with a different private lender like PenFed, it could be a smart solution to help you save a great deal of money over the life of your loan.
When you refinance a federal student loan, you are essentially replacing it with a new loan through a private lender. Since some types of federal loans can come with high interest rates, going this route could give you the chance to secure a lower rate and save a significant amount of money down the road.
If you do refinance a federal student loan, you will have to give a few things up. Since you’re moving your federal loans to a private lender, you’ll lose access to all federal student loan benefits including:
Public Service Loan Forgiveness
Income-driven repayment plans
If keeping one or more of these benefits is important to you, refinancing may not be the right solution for your needs.
If you have private and federal student loans, rest assured you can refinance them together through one private lender. The caveat, however, is that if you’re refinancing federal loans, you will lose access to the federal benefits listed above.
Whether you’re refinancing private loans, federal loans, or a combination, here are some things to keep in mind:
The lower your rate, the more you’ll save on interest over the course of your loan with all else being equal. However, it’s not the only factor to consider. PenFed’s term options offer great flexibility, with five, eight, 12, and 15-year terms available.
You can also choose between a fixed or variable rate. A variable rate will likely start lower than a fixed rate, but it will fluctuate over time and change your monthly payment. A fixed rate, meanwhile, never changes and is locked in for your entire loan — allowing you to easily account for your payment each month.
Choosing a lender like PenFed with flexible repayment terms can give you more control over your monthly payment. You may be able to extend your term to lower your monthly payment and have more room in your budget. Or, you could shorten your term to pay off your loans much more quickly while saving more on interest costs.
If you move forward with refinancing a student loan, you can take advantage of many benefits including:
Lower Interest Rate: When you refinance a student loan, a private lender will pay off your old loan and provide you with a new interest rate. If the interest rate is lower than the one you had before, you could save a lot of money over the life of your loan.
Lower Monthly Payment: If you’re short on cash flow, a student loan refinance can allow you to stretch out your repayment term which will reduce your monthly payments. On the flipside, if your goal is to pay off your loan faster and save on interest, you can shorten your repayment term.
One Manageable Payment: You may have multiple federal and private student loans from various lenders. If this is the case, you can replace these loans with a single loan that’s much easier to manage. You’ll no longer have to keep track of multiple payments and due dates.
High Interest Rate: If you have a high interest rate on your current student loan and can land a lower one, refinancing can save you big money over the life of your loan. You could use this extra money to pad your emergency savings, save for a house, max out your 401k, and meet any other financial goals you may have.
Consolidation of Multiple Loans: Refinancing to consolidate multiple student loans into one can make your life easier. Since you’ll only have one payment and balance to keep track of, you’ll reduce your risk of missed payments. You’ll also have a good idea of where you stand in your student loan payoff journey.
Refinancing a student loan can be the key to getting out of debt and taking control of your financial future. So if you believe you’re a good candidate for a student loan refinance, it’s time to get to work. Explore PenFed’s student loan refinancing options and find out whether it’s a good option for your unique situation.