According to one report, more than $4 billion in student loans were refinanced in 2020. 1 To save money is the main motivation for why so many borrowers want to refinance. Refinancing at a lower rate if you have a loan with a high interest rate can result in cost savings over the course of the loan.
There are pros and cons to refinancing student loans. Saving money is great, but not everyone qualifies, and you risk losing valuable benefits. Let’s examine what refinancing federal and private student loans entails, what to look for, what to think about, and how to actually begin the refinancing process.
Refinancing vs Consolidating Student Loans
Understanding how to refinance versus consolidate your student loans can be confusing:
Who Can Refinance Their Student Loans?
Even if you’ve already refinanced your federal and private student loans, you might still be able to do so. Since most borrowers who refinance have already graduated from college, there has been sufficient time for interest rates to change. A lender will consider your credit history when evaluating your refinancing request if you have been out of school for a few years.
Refinancing a student loan entails a lender paying off your existing loan balances. You receive a new loan in exchange, possibly with a lower interest rate. You will still have a new loan with your current lender if they are doing the refinancing.
What Happens When You Refinance a Student Loan?
Refinancing your student loans is essentially the same as applying for a new loan. Many of the same criteria that lenders used to evaluate your initial application for a (private) student loan will be used again, such as these:
Refinancing private student loans
Refinancing private student loans is possible, either through your original lender (if they provide it) or a different private lender. There are pros and cons to refinancing:
When choosing whether to refinance, you should take into account both the interest rate and the repayment period.
Refinancing federal student loans
Refinancing private loans as opposed to federal student loans might be a simpler choice. Federal loans offer a number of flexibility and benefits. Therefore, even though you might save money, you must weigh that money against the impact of giving up features and benefits:
While the government does not offer loan refinancing, consolidation is available, and it may help you retain some of your benefits. Check studentaid.gov to find out what’s available for your federal student loans.
Should I Refinance My Student Loans?
Obtaining a better financial deal is the main justification for refinancing. Refinancing might be worth considering if rates have fallen since you took out your loan (or if it appears that they will rise and your variable interest rate will follow suit).
To see if you could get a better deal financially from refinancing your student loans, check out an online student loan refinance calculator from Nitro.
Things to Consider Before Refinancing Student Loans
How to Refinance Student Loans
Following your decision to refinance your debt, you should do the following:
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Can I transfer my Sallie Mae loans to another lender?
You can refinance your Sallie Mae loans with a different lender, but Sallie Mae does not provide student loan refinancing. The majority of the items featured here are provided by our partners, who pay us.
How do I get rid of my Sallie Mae student loans?
Temporarily defer payments
- Returning to college.
- Attending graduate school.
- Starting an internship, clerkship, fellowship, or residency.
Are Sallie Mae student loans eligible for loan forgiveness?
No, Sallie Mae is not participating in the forgiveness program; it only applies to federal student loans. Sallie Mae loans and other private student loans won’t be forgiven under this program. 3.
Can you refinance Sallie Mae loans to federal?
Sallie Mae no longer provides private student loan refinancing, and it also no longer provides student loan consolidation. However, keep in mind that you still have the choice to consolidate through a federal Direct Consolidation Loan if you had federal student loans with Sallie Mae that are now serviced by Navient.