The total amount of student loan debt in the United States has grown to unprecedented levels. According to the Pew Research Center, Americans owe more than $1.3 trillion in student loans.
With such high levels of debt, more people are considering student loan refinancing to get relief. For those with higher interest rates and monthly payments, refinancing can be a smart solution.
What is student loan refinancing?
"Should I refinance student loans?" Before you ask that, it’s important to understand what refinancing is. It involves taking out a loan from a private lender, who pays off some or all of your current loans. Going forward, you’ll have just one loan and one easy payment.
The new loan is completely different from your previous ones. It will have a different interest rate, monthly payment and repayment term. Depending on what rate you qualify for and if you decide to shorten or extend your repayment term, you could save a significant amount of money or reduce your monthly payment.
5 Benefits to refinancing
Refinancing offers five key benefits to borrowers, which are available should you refinance student loans:
If you qualify for a lower interest rate or choose a shorter term when you refinance your loans, you could save a substantial amount of money over the length of your repayment.
become debt-free faster
Say you get a great new rate…with more of your monthly student loan budget going toward principal, rather than your previously-higher interest, you can pay off your debt ahead of schedule.
get a lower monthly payment
If you get a lower rate or extend your repayment term, you could reduce your monthly payment.
Have one payment
Instead of juggling federal and private loans with different payments and due dates, you’ll have just one loan and one payment to keep track of after refinancing.
Choose a fixed or variable interest rate
When you refinance, you can opt for a fixed or variable interest rate. With a fixed rate, your interest rate stays the same for the life of your loan. Variable rates fluctuate over time.
Still unsure why to refinance student loans? To find out how much you could save, check out our student loan calculator, and see what kind of difference it could make in your total cost or monthly budget.
Should I refinance my Federal student loans?
Although student loan refinancing has many benefits, it’s not for everyone. Whether you have federal or private student loans, there are some factors you should keep in mind.
If you have federal student loans, refinancing means giving up certain protections, such as access to income-driven repayment (IDR) plans. With an IDR plan, your loan servicer—the company you make payments to and who manages your loan—extends your repayment term and sets your monthly payment based on your discretionary income level. You will lose access to this benefit, should you refinance student loans.
That shouldn’t be a dealbreaker for everyone, though. You may not qualify for an IDR plan, in which case refinancing may be the only way to reduce your monthly payment. Also, the temporary relief you get from IDR comes at a cost: the total interest you pay over the life of the loan will drastically increase.
With federal loans, there is also access to forgiveness programs, like Public Service Loan Forgiveness (PSLF). With PSLF, the government can potentially forgive your loan balance after you make 10 years of qualifying payments and meet all the program criteria.
That might sound like a dream come true. But, it’s important to keep in mind that, according to statistics released by the U.S. Department of Education, 99% of PSLF applicants were denied forgiveness as of June 2018.
Forbearance and Deferment
If you face a financial hardship, like losing your job, you can place your federal loans into deferment or forbearance. That means you can postpone making payments, without entering into default.
Should you consolidate student loans with PenFed, your options will be more limited–that said, PenFed will work with you on a case-by-case basis if you’re facing a tough life situation and can’t afford to make loan payments.
Who is refinancing
So what’s the bottom line? Should I refinance my student loans? Refinancing makes the most sense if you’ve graduated from college, are employed, and have high-interest federal and/or private student loans. Refinancing can help you save money and even shorten your repayment term, to get debt-free faster.
Refinancing student loans with penfed
Refinancing your student loans is incredibly easy; you can do it in just a few minutes.
To get started, enter your information into the Find My Rate tool. The tool will prompt you to enter basic information, such as where you went to school, the type of degree you earned, and your credit score. On the next screen, you can indicate your loan information and whether or not you’ll have a co-signer.
Based on what you enter, the tool will tell you the interest rates you could qualify for on each repayment term, as well as the monthly payment and total savings each option offers. Once you find an option that works for you, select that loan and complete the application.
Refinancing your student loans is a quick and effective way to take charge of your debt, to help you save money and to get rid of your debt faster.
WE WILL PAY OFF YOUR EXISTING LOANS AND SET UP YOUR NEW LOAN WITH US!