Student loan refinancing is a way to save money by swapping your current student loans for a new and a lower interest rate loan. It is simple concept but there are lots of details to dig into. Refinancing involves repaying an older debt by taking on a new loan with fresh terms. Students eager to refinance their loans through a private lender may run into challenge that they will have to select a student loan servicer through which to refinance. That is especially daunting as an increasing number of institutions from traditional banks to investor-funded star ups enter the student loan refinancing market.
The following are the three questions to ask you before refinancing students’ loans;
1) Why am i refinancing?
Borrowers may choose to refinance for any number of reasons. Some may be hunting for lower interest rates while others may want to simplify the repayment process, melding a mix of loans into single debt instead of repaying several lenders. Therefore, borrowers looking for a change may head over to an online star up for a different customer experience and others may look to remove a cosigner from a private loan in the process.
However, federal borrowers angling for a better interest rate through a private group should keep in mind that refinancing federal loans into private debts carries risk which includes giving up federal loan protections.
2) What are the strengths of each lender?
Each lender has its sales pitch, where some such as Wells Fargo are indeed familiar companies. Therefore, since the bank issues new student loans, current Wells Fargo borrowers can refinance for better terms but stay with the bank. Some borrowers may do the rest of their banking at Wells Fargo and moving loans over to the bank will allow them to manage their finances in one place. However, others such as SoFi are relatively new investor backed star ups with a focus on customer service and community. However, the company offers temporary repayment reprieve and job search assistance for eligible borrowers who lose their jobs and also a chance at loan deferment and mentorship for the aspiring entrepreneurs.
3) What rate can i get?
Not all gains can be measured in dollars. College is an investment and like any other investment you have initial costs. However, keeping your in front costs to a minimum should logically help boost that return. Therefore, once you confirm your initial costs, you can then calculate a future salary based on your degree. Pay scale offers salary projections for specific majors and offers a return on investment calculation based on future income and college costs. For students pursuing advanced degrees might have greater upfront costs but their starting salaries after graduation generally justify the expense.
Almost anybody can qualify for student loans regardless of credit score or future income potential and for this reason, most students neglect to consider their ability to pay them off or the impact they can have on meeting their goals. Therefore, be proactive, establish a college planning strategy, start saving early and more so make education your greatest investment.